Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100).The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100).Now, suppose there is an increase of $30 billion in investment in each economy. Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibriumwith real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxesthat change with income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100).The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100).Now, suppose there is an increase of $30 billion in investment in each economy.Place a green line (triangle symbol) on each of the previous graphs to indicate the new total expenditure line for each economy. Then place a black point(plus symbol) on each graph showing the new level of eqguilibrium output. (Hint: You can see the slope and vertical axis intercept of a line on the graphby selecting it.)(?(?МРС-0.5MPC=0.7020045-Degree Line45-Degree Line200180180New AE LineNew AE Line180160140140120New Equilibrium120New Equilibrium1001008080AE Line40AE Line2020406080100120140160180 20020406080100120140180180200REAL GDP (Billions of dollars)REAL GDP (Billions of dollars)In the first economy (with MPC = 0.5), the $30 billion increase in investment causes equilibrium output to increase by $billion. In thesecond economy (with MPC = 0.70), the $30 billion increase in investment causes equilibrium output to increase by $billion. Therefore, ahigher MPC is associated with av multiplier.higher or lower?Now, confirm your graphical analysis algebraically using the oversimplified multiplier formula:Multiplier =For the first economy, with an MPC of 0.5, the effect of the $30 billion increase in investment is as follows:multiplier options:Change in Equilibrium Output = Change in Total Erpenditure x Multiplier1x (1– 0.70)1-0,701 (1– 0.5)Using the same method, the multiplier for the second economy ischoices: (0.70, 2 , 0.3, 0.59,3.33)Change in TotalExpenditure choices:+$60 billion-$30 billion+$30 billion-$60 billionTOTAL EXPENDITURE (Billions of dollars)TOTAL EXPENDITURE (Billions of dollars)

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Given information:
There are two economies -
First economy has MPC = 0.5 and 
Second economy has MPC…