The government spends an additional $668 billion and the marginal propensity to consume is 79%. How much will GDP increase due to this additional government spending? Enter your answer in billions and round to two decimal places.

The government spends an additional $668 billion and the marginal propensity to consume is 79%. How much will GDP increase due to this additional government spending? Enter your answer in billions and round to two decimal places.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2E

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Question

The government spends an additional $668 billion and the marginal
propensity to consume is 79%. How much will GDP increase due to
this additional government spending?
Enter your answer in billions and round to two decimal places.

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Step 1: Explain Government spending multiplier and Marginal propensity to consume

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Step 2: Calculate the Change in GDP due to additional government spending

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