Suppose a private closed economy has an MPC of 0.7 and a current equilibrium GDP of $100 billion. a. What is the multiplier in this economy? b. Now suppose the economy opens up trade with the rest of the world and experiences net exports of $10 billion. What impact will this have on equilibrium real GDP? c. Next suppose a government is introduced, and plans to spend $10 billion. By how much will this change in spending ultimately cause GDP to change, and in what direction?

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A:

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A: Equilibrium income = $400 Full employment income = $650

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A: Please find the answer below.

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Q: marginal propensity to save

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A: Spending multiplier show the circulation of money how much time occurs in economy so here we can…

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A: Hi Student, Thanks for posting the question. As per the guideline, we are providing answer for the…

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A: Answer to the question is given below :

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A: GDP is the value of final goods and services produced in the economy within a given period of time.