The Government has been providing payment support for those affected by COVID-19. Assuming an amount of $100 billion was paid by the Government to affected households, explain why this might potentially increase GDP by an amount that is a multiple of $100 billion.
Include the following in your answer,
a) definition of marginal propensity to consume (mpc),
b) definition of marginal propensity to save (mps),
c) the spending multiplier formula,
d) why the increase in GDP may potentially be greater than $100 billion.
