If the United States' government spends $30 billion, what is the amount of demand for goods and services if the MPC is ¾?

Question

Quizplus · Accepted Answer

The amount of demand for goods and services is $120 billion.
Key Takeaway: The multiplier effect of the United States government spending is as follows:
Multiplier = 1/(1-MPC) = 1/(1-3/4) = 4. Since the multiplier is 4, the amount of demand for goods and services is the initial amount ($30 billion) multiplied by the multiplier (4) which makes it $120 billion.

If the United States' Government Spends $30 Billion, What Is