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he Italian government decides to stimulate the economy by sending checks worth $ 70 billion to Italian consumers. If the government spending multiplier is 1.5 , calculate the MPC to determine the final change in Italy's real GDP due to the transfer. Please give your answer as a whole number in billions of dollars.

Respuesta :

Answer:

real GDP = $105 billion

change in real GDP = $35 billion

Explanation:

given data

multiplier = 1.5

sending checks worth =  $70 billion

solution

we get here first MPC marginal propensity to consumer that is

multiplier = [tex]\frac{1}{1-MPC}[/tex]   ..................1

1.5 = [tex]\frac{1}{1-MPC}[/tex]

MPC = 0.333

and

now we get real GDP that is

real GDP = multiplier × government spending

real GDP = 1.5 × $70 billion

real GDP = $105 billion

and

change in real GDP will be

change in real GDP  = $105 billion - $70 billion

change in real GDP = $35 billion

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