Respuesta :
A smaller eventual effect on real gdp if the government increases its purchases of goods and services by $75,000
Calculating the problem :
Given the MPC, the multiplier can be calculated as follows:
M = 1/(1-MPC)
M= 1/(1-0.75)
M = 4
Increase in government purchases = $75000
Therefore, increase in real GDP = $75000 x 4
= $300,000
Marginal Propensity Consume:
In economics, the marginal propensity to consume (MPC) is defined as the proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services rather than saving it. As can be seen above, an increase in government transfer taxes will ultimately have a smaller effect on Real GDP than an increase in government purchases of goods and services.
The minimal propensity to consume is a metric that measures prompted utilization, the idea that the expansion in private purchaser spending happens with an expansion in extra cash. Propensity to consume is the percentage of disposable income that is spent on consumption.
Learn more about Marginal propensity consume:
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