Figure 12-3
-Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?
A)$9 million
B)$10 million
C)$90 million
D)$100 million

Question

Figure 12-3 
-Refer to Figure 12-3.Suppose that investment spending increases by $10 million,shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2.If the MPC is 0.9,then what is the change in GDP?
A)$9 million 
B)$10 million 
C)$90 million 
D)$100 million

Quizplus · Accepted Answer

The change in GDP can be calculated using the formula: Change in GDP = MPC x Change in Investment Spending
In this case, the change in investment spending is $10 million and the MPC is 0.9
Therefore, the change in GDP = 0.9 x $10 million = $9 million
Hence, the correct answer is D.

Figure 12-3 -Refer to Figure 12-3.Suppose That Investment Spending Increases by $10