Aggregate Expenditures and Multipliers Assignment 5.0 14.8 140 -5 13.2 I a 13.0
ID: 1161190 • Letter: A
Question
Aggregate Expenditures and Multipliers Assignment 5.0 14.8 140 -5 13.2 I a 13.0 14.0 15.0 Real GDP trilions of dollars) I 1 Using the aggregate expenditure function above, what is the current levet of real GDP 2. Using the aggregate expenditure function above, what would be the level of real GDP if the aggregate expenditure function shifted up by $0.2T 3. If Investment expenditures increase by $3008 and MPC is equal to 090, what wil be the increase in real GDP? 4. if Government expenditures increase by $8008 and MPS s equal to 0.0S, what will be the increase in real GDP?Explanation / Answer
Answer.)
Q3.) If MPC is 0.9, it means that multiplier is = [1/1-MPC] = 10
Therefore if investment Increases by $300B then real GDP would increase by => ($300B × 10) = $3000B
Q4.) If MPS is 0.05 then MPC is (1-MPS) => 0.95 and multiplier is => (1/1-0.95) = 20
Therefore if Government expenditure Increases by $800B then real GDP Increases by => ($800 × 20) = $16000B