the marginal propensity to consume (mpc) is 0.60. the multiplier is 2.5. (round your answer to one decimal…

the marginal propensity to consume (mpc) is 0.60. the multiplier is 2.5. (round your answer to one decimal place.) suppose that government spending changes by $500. the change in real gdp will be $ . (round your answer to the nearest dollar.)

the marginal propensity to consume (mpc) is 0.60. the multiplier is 2.5. (round your answer to one decimal place.) suppose that government spending changes by $500. the change in real gdp will be $ . (round your answer to the nearest dollar.)

Answer

Explanation:

Step1: Recall the formula for change in real GDP

The formula for the change in real GDP due to a change in government - spending is $\Delta Y = k\times\Delta G$, where $\Delta Y$ is the change in real GDP, $k$ is the multiplier, and $\Delta G$ is the change in government spending.

Step2: Substitute the given values

We are given that $k = 2.5$ and $\Delta G=500$. So, $\Delta Y=2.5\times500$.

Step3: Calculate the result

$\Delta Y = 1250$.

Answer:

$1250$