marginal propensity to import is 0.1, and the government increases expenditures by Rs. 10 billion, ignoring foreign-income repercussions, by how much will GDP rise?
ARs. 15 billionCorrect AnswerIncorrect Answer
BRs. 10 billionCorrect AnswerIncorrect Answer
CRs. 20 billionCorrect AnswerIncorrect Answer
DRs. 25 billionCorrect AnswerIncorrect Answer
ENone of theseCorrect AnswerIncorrect Answer
Solution
Multiplier = 1/(1-c+m) = 1/(1-0.7+0.1) = 1/0.4 = 2.5 Change in GDP = 2.5 Change in G = 2.5 (10) = 25