### Problem Set on GDP Change#### Question:**a. By how much will GDP change if firms increase their investment by $11 billion and the MPC is 0.8?****Instructions:** Round your answers to the nearest whole number.- The change in GDP = $____ billion.**b. If the MPC is 0.5?**- The change in GDP = $____ billion.#### Explanation:This exercise is designed to help you understand the impact of changes in investment on GDP, considering different Marginal Propensity to Consume (MPC) values. The concept of the multiplier effect in economics is essential for these calculations. To calculate the change in GDP:\[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \]\[ \text{Change in GDP} = \text{Multiplier} \times \text{Change in Investment} \]Use the formulas above to find the answers, and make sure to round your results to the nearest whole number.

Answered: Image /qna-images/answer/34d17977-9445-464f-bdba-a34d39a16be0.jpg

a. By how much will GDP change if firms increase their investment by $11 billion and the MPC is 0.8? Instructions: Round your answers to the nearest whole number. The change in GDP $ billion. b. If the MPC is 0.5? The change in GDP $ billion.

a. By how much will GDP change if firms increase their investment by $11 billion and the MPC is 0.8? Instructions: Round your answers to the nearest whole number. The change in GDP $ billion. b. If the MPC is 0.5? The change in GDP $ billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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