Chapter 11.A, Problem 1P

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.

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

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,

$\text{Multiplier}=\frac{1}{\left(1-MPC\right)}$

Here, MPC is marginal propensity to consume.