if-the-mpc-is-09-what-is-the-multiplier-and-how-would-a-2-billion-increase-in-go

Question

If the MPC is 0.9, what is the multiplier and how would a $2 billion increase in government spending affect GDP?

Accepted Answer

The multiplier is 10, and GDP would increase by $20 billion.

Answer

The multiplier is 5, and GDP would increase by $10 billion.

Answer

The multiplier is 2, and GDP would increase by $4 billion.

Answer

The multiplier is 1, and GDP would increase by $2 billion.

If the MPC is 0.9, what is the multiplier and how would a \$2 billion increase in government spending affect GDP?