Question

The value of the marginal propensity to save is 0.2. If real GDP increases by $50 billion, this situation was the possible result of an increase in the government purchases of $

Answer 1

Answer:

$10 billion

Explanation:

You can find the spending multiplier by 1/MPS+MPI but since only MPS is given, 1/.2 = 5

We can use this to find how much the government injects into the economy to boost is 50 billion.

50 / 5 = $10 billion