In a simple economy in which prices are constant and with no income taxes or imports, the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

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The multiplier effect is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. With a slope of 0.8, the MPC is 0.8, so the multiplier is 1/(1-0.8) = 5. Therefore, an increase in autonomous expenditure of $100 billion will lead to an increase in GDP of $100 billion * 5 = $500 billion.

In a Simple Economy in Which Prices Are Constant and with No