Question

Use the relationship between an initial change in spending and the final change in real GDP to answer these questions about the economies of Utopia and Paradise. The government of Utopia increases spending by $ 4.5 billion and the multiplier is 2 . Real GDP will by how many billion dollars

Answer 1

Answer:

Detailed solution is given below:

Answer 2

The real GDP will be increased by $8.4 Billion, if the government of Utopia increases spending by $4.5 billion and the multiplier is 2.

What is real GDP?

The full name of Real GDP is real gross domestic product. It is an inflation-adjusted standard that shows the numerical quantity of all goods and services produced by an economy in an assumption year.

It is also referred to as “constant-price,” “inflation-corrected”, or “constant dollar” GDP. This GDP changes as the economy of a particular state changes.

The formula to find the change in real GDP is :

$\triangle \text{ Real GDP} = \text{Multiplier} \times \triangle\text{Government Spending}$

Computation of change in real GDP:

According to the given information,

Multiplier = 2,

Government Spending = $4.5

$\triangle \text{ Real GDP} = \text{Multiplier} \times \triangle\text{Government Spending}\\\\\triangle \text{ Real GDP} = 2\times4.5\text{Billion}\\\\\triangle \text{ Real GDP} = \ 8.4 \text{Billion}$

Therefore, if the government of Utopia increases spending by $4.5 billion and the multiplier is 2 its real GDP is $8.4 Billion.

Learn more about the real GDP, refer to:

https://brainly.com/question/14034620