Question: Other things being constant, if the marginal propensity to save (MPS) is 0.2, and private investment spending falls by $100 million, then real Gross Domestic Product (GDP) increases by $80 million.
Added by Paul M.
Step 1
In this case, MPS is 0.2, so the multiplier is 1 / 0.2 = 5. Show more…
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