An Economy has no imports or taxes, the MPC is 0.90 and real GDP is $12 trillion. If?
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8.An Economy has no imports or taxes, the MPC is 0.90 and real GDP is $12 trillion. If businesses increase investment by $0.1 trillion: 8a. Calculate the multiplier? 8b. Calculate the change in real GDP? 8c. Calculate the new level of real GDP?
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Answer:
8a multiplier=1/1-.9=1/0.1=10. 8bThe change in real GDP= 0.1x10=10 trillion. 8c GDP=12+10=22trillion.
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