Answer:
Change in GDP = $40 billion
Explanation:
given data
increase investment = $8 billion
MPC = 0.80
to find out
Change in GDP
solution
we get here Change in GDP that is express as
Change in GDP = Change in Investment × Expenditure multiplier ..............................1
and here Expenditure multiplier = [tex]\frac{1}{1-mpc}[/tex]
Expenditure multiplier = [tex]\frac{1}{1-0.8}[/tex]
so here put value in equation 1
Change in GDP = $8 billion × [tex]\frac{1}{1-0.8}[/tex]
Change in GDP = $40 billion
