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Porciabeauty4175
13.08.2020 •
Business
Potential GDP of an economy is $12 billion. Real (Actual) GDP is $20 Billion. Marginal propensity to consume is 0.75. What level of Government spending is required to achieve Full employment
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Ответ:
Government spending required = $2 billion
Explanation:
The required amount of GDP to achieve the full employment GDP =
Potential GDP - Actual
that is 20 - 12 = $8 billion.
But note that a government spending of less than $8 billion would be required to achieve an increase of 8 billion in real GDP. This is so because of expenditure multiplier effect.
The expenditure multiplier is the amount by which the aggregate output would increase with an increase in any of the expenditure components.
It is calculated as follows;
Multiplier = 1/(1-MPC)
For this question ,
Expenditure multiplier = 1/(1-0.75) = 4
This implies that $1 change in any of the aggregate expenditure would lead a $4 worth of change in GDP.
Government spending required is determined as
Desired change in real GDP/expenditure multiplier
= $8 billion/4 = $2 billion
Government spending required = $2 billion
Ответ:
don't use as a way to make friends or a boyfriend. honestly
Explanation:
go out and meet people in your school or something
this is not a safe place to do this