Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. If GDP and consumption both rise by $6 billion in the second round of the process, what is the MPC in this economy?
Instructions: Round your answer to one decimal place
MPC = ________
What is the size of the multiplier?
Instructions: Round your answer to one decimal place
The multiplier = ________
If, instead, GDP and consumption both rose by $8 billion in the second round, what would have been the size of the multiplier?
The multiplier =