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BigCat
BigCat asked in Social ScienceEconomics · 8 years ago

Macroeconomic marginal propensity to consume question help!?

If the marginal propensity to consume is 0.9, what happens to GDP if you dip into your savings to buy a $2,000 stereo system?

Autonomous spending increases by $1,800, and GDP rises by $18,000.

Autonomous spending increases by $2,000, and GDP rises by $20,000.

Autonomous spending increases by $1,800, but GDP remains unchanged.

Autonomous spending increases by $2,000, but GDP remains unchanged.

2 Answers

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  • Anonymous
    8 years ago
    Favorite Answer

    Multiplier=1/1-0.9=10

    It will increase GDP=10 x 2000=$20,000.

  • ?
    Lv 7
    8 years ago

    Autonomous spending increases by $2,000, and GDP rises by $20,000.

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