00:01
All right, so we're basically looking here at a country whose real gdp is actually $480 billion, and now there's going to be a decrease in investment of $4 billion, and that will result in the gdp shifting to a new equilibrium of $470.
00:19
So what is the spending multiplier for this country? okay, so basically we want to look at the multiplier in reverse, because if we look at the initial gdp level, and this is real gdp, gdp at constant prices, is actually $480 billion.
00:39
And the decrease in investment is actually $4 billion.
00:50
And the new equilibrium level is actually $470 billion.
01:02
Okay, so the first premium level.
01:04
Question is what is the spending multiplier, the spending multiplier, spending capital m.
01:12
Okay, so this is basically going to be looked at in two ways, but we'll just focus on one.
01:19
We want to find out the difference or the change in gdp as a result of the decrease in expenditure, which is basically $480 minus the $470 billion.
01:31
You divide that by the 4 billion to find out by how much the amount has been multiplied to have that difference in gdp.
01:46
So this gives us actually an spending multiplier of 2 .5.
01:50
So this is the amount to apply 2 .5.
01:54
And then the second part of the question looks at the martial propensate it was safe...