00:01
Steming from the last problem in which we were given that the margin propensity to consume of an economy was 0 .8.
00:06
The real gdp is $150 billion and there was a business investment increase of $5 billion.
00:11
What we found was this multiplier for the economy as well as this change in real gdp of $25 billion.
00:18
But now for this question, we're focusing on what is this new real gdp and why is that increase more than $5 billion? so starting with this new real gdp, we're just going to take what we started with, which was that $150 billion.
00:32
Plus that change in real gdp that we found down here to be $25 billion, which gives us a new real gdp of $175 billion.
00:50
Now we want to know why was that increased more than $5 billion, right? we see that it increased by this $25 billion, but from the information given to us, business investment was the only change in the economy, and that was a change of $5 billion.
01:03
This comes down to taking a look at the multiplier, and we found that the multiplier was equal to $5.
01:08
So that means that any change in expenditure within that economy needs to be multiplied by this multiplier to give us that actual increase...