If the MPC is .9 and investment spending increases by $20 billion,real GDP will increase by $200 billion.

Name: If the MPC is .9 and investment spending increases by $20 billion,real GDP will increase by $200 billion.
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Quizplus · Accepted Answer

This is because the formula for calculating the Gross Domestic Product multiplier when the MPC is given is 1/MPC. So, 1/0.9 = 1.11. Therefore, an increase in investment spending by $20 billion will lead to a total increase in real GDP of $20 billion x 1.11 = $22.2 billion.

If the MPC Is