If the MPC is .9 and government spending increases by $10 billion,GDP will rise by $______ billion.

Question

Quizplus · Accepted Answer

The formula to calculate the change in GDP is:

Change in GDP = (Government spending change) x (1/MPC)

Using the given MPC of 0.9 and the increase in government spending of $10 billion, we can calculate the change in GDP as:

Change in GDP = ($10 billion) x (1/0.9) = $100 billion

Therefore, the correct answer is D) 100.

If the MPC Is