Gross Domestic Product : It is defined as the money value of all finished goods and services that are produced by the normal resident and nonresident of the country inside the boundary of a country usually for one year. The formula to calculate change in GDP is, Here, is autonomous spending MPC is marginal propensity to consume. Marginal Propensity to Consume ( MPC ): It is defined as the change which occurs in total consumption level due to change in income. The formula to calculate MPC is, Here, is change in income. is change in consumption level. MPC is marginal propensity to consume. Multiplier: It is defined as the ratio of total change in gross domestic product due to change in the autonomous spending. The formula to calculate multiplier is, Here, MPC is marginal propensity to consume.

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Chapter 11, Problem 2P

To determine

Concept Introduction:

Gross Domestic Product: It is defined as the money value of all finished goods and services that are produced by the normal resident and nonresident of the country inside the boundary of a country usually for one year.

The formula to calculate change in GDP is,

Here,

is autonomous spending

MPC is marginal propensity to consume.

Marginal Propensity to Consume ( MPC ): It is defined as the change which occurs in total consumption level due to change in income.

The formula to calculate MPC is,

Here,

is change in income.

is change in consumption level.

MPC is marginal propensity to consume.

Multiplier: It is defined as the ratio of total change in gross domestic product due to change in the autonomous spending.

The formula to calculate multiplier is,

Here,

MPC is marginal propensity to consume.

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