00:01
So here we're talking about multipliers, and we're not given the structure of the full economy, but we can say some things.
00:07
Normally, if we have a linear consumption function, and this is the information we're not given here, so i'm going to assume it, we have the following idea that the multiplier, which is equal to the change in output with with respect to a change in spending, is one over one minus the mpc.
00:34
So here, if the mpc is equal to 0 .7, the multiplier would be one over 0 .3.
00:46
So now we are thinking about the spending, right? the initial change in spending is equal to 20 billion, and the total is going to be the change in y.
01:03
So the change in y will be the multiplier times the change in spending.
01:11
So this will be equal to 21 divided by 03, three, which is equal to 66 .67 billion, right? similarly, now we're going to reverse it.
01:28
So here in b, we want the change in y to be 300.
01:35
The mpc is 0 .75.
01:39
And this implies that the multiplier multiplier is equal to 1 over 1 minus 0 .75 is equal to 4.
01:48
So the change in y over the change in g is equal to 4.
01:55
This, however, is going to be 300.
01:58
And that implies that the change in g will be 300 over 4 is equal to 75 billion...