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The hypothetical country of Villagestan has no imports, no income taxes, and current real GDP that equals $150 million . Calculate the new level of real GDP if investment spending increases by $13.5 million and the marginal propensity to consume (MPC) is 0.7 .

Respuesta :

Parrain

Based on the current level of GDP, the investment spending, and the MPC, the new level of the real GDP will be $195 million.

What is the new level of the GDP?

First find the investment multiplier as:

= 1 / (1 - MPC)

= 1 / (1 - 0.7)

= 3.333

The new level of GDP is:

= Current level of GDP + (Investment spending x Multiplier)

= 150 + (13.5 x 3.333)

= $195 million

Find out more on the investment multiplier at https://brainly.com/question/6600233.

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