contestada

Suppose kittyville's full‑employment gdp is $600 billion, and the current equilibrium gdp is $400 billion. The mpc in this economy equals 0. 90.

Respuesta :

Parrain

In order to get Kittyville's GDP to the full-employment GDP, the increase in government spending should be $20 billion.

By how much should government spending increase?

The amount the government should increase its spending by is:

= GDP gap / Multiplier

Multiplier = 1 / ( 1 - MPC)
= 1 / ( 1 - 0.9)

= 10

Amount to increase spending by:

= (600 - 400) / 10

= 200 / 10

= $20 billion

In conclusion, government spending should increase by $20 billion.

Find out more on the spending multiplier at https://brainly.com/question/490794.

Otras preguntas