The total change in real GDP and the value of the multiplier. Concept Introduction: Gross Domestic Product (GDP): It is defined as the value of output which is produced inside the border of a country in the given interval of time. 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 26, Problem 10P

To determine

To determine: The total change in real GDP and the value of the multiplier.

Concept Introduction:

Gross Domestic Product (GDP): It is defined as the value of output which is produced inside the border of a country in the given interval of time.

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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