Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 26, Problem 10P
To determine
To determine: The total change in real GDP and the value of the multiplier.
Concept Introduction:
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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