if the MPC in an economy is 0.90, a $4 billion increase in government spending will ultimately increase real GDP by rev:$ 36 billion. Option D
This is further explained below.
Generally, The gross domestic product (GDP) of a nation is a monetary measurement that is based on the market value of all of the final products and services that were produced and sold in a certain time period.
Before being regarded as a trustworthy indication, this measure often undergoes revision because of the complexity and subjectivity inherent in its design.
An increase in the GDP equals more expenditure by the government. / ( 1 - MPC)
= 4 * / ( 1 - 0.9)
The rise in GDP is equal to $40 BILLION.
A rise in income will lead to an increase in GDP.
MPC is the rise in consumption divided by the rise in income.
0.09 is the increase in consumption divided by 40.
An increase in consumption results in an additional $36 billion.
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