Question Suppose the marginal propensity to consume (MPC) is 0.9 and there is a $4,000 increase in planned investment. Given this information, real GDP will increase by1. $45,000.2. $10,000.3. $20,000.4. $40,000.
Added by Harold B.
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The multiplier effect refers to the proportional amount of increase in final income that results from an injection of spending. It is calculated as \( \text{Multiplier} = \frac{1}{1 - \text{MPC}} \). Show more…
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