4. If the MPC is 0.8 and government purchases increases by $2,000, holding all else constant, real GDP will increase by _____ according to the multiplier effect. Please round to 2 decimal places.
Added by Lauren W.
Step 1
Step 1: Identify the Multiplier Formula The multiplier effect is calculated using the formula: \[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \] where MPC is the marginal propensity to consume. Show more…
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