An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier?    Value of the multiplier =

Economics For Today
10th Edition
ISBN:9781337613040
Author:Tucker
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Chapter19: The Keynesian Model In Action
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An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions.

a. What is the value of the multiplier?   

Value of the multiplier =
 
 

b. What would you expect the total change in Y* to be based on the multiplier formula?

Change in Y* based on the multiplier =
 
billion

c. What is the total change in real GDP after the 10 rounds?

It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values.

Total change in real GDP (10 rounds) =
 
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