Respuesta :
- Real GDP grows by $320,000 while government purchases rise by $80,000.
- If transfers rise by $80,000, the real GDP will have changed by a total of $240,000. Thus, the real GDP grows by $240,000.
What is nominal and real GDP?
Before taking inflation into account, nominal GDP takes the raw data in current dollars. By modifying the data and setting the currency's value, real GDP removes any distortion caused by inflation or deflation.
How can I determine actual GDP?
Usually, the GDP deflator is multiplied by nominal GDP to calculate real GDP (R). For instance, if a nation's economic prices have increased by 1% since the base year, the deflationary number is 1.01. Real GDP is calculated as nominal GDP multiplied by 1.01, which equals $990,099 in this case.
Given that,
(a). Increase in government spending of $80,000
Marginal propensity to consume (MPC) = 0.75
Real GDP= [tex]\frac{1}{1- MPC}[/tex] x Government Purchases
= [tex]\frac{1}{1 - 0.75}[/tex] X 80,000
= 4 X 80,000
= $320,000
A $320,000 rise in Real GDP results as a result.
(b). In the event that transfers rise by $80,000
MPC = 0.75 (MPC doesn't change)
Real GDP= [tex]\frac{MPC}{1- MPC}[/tex] x Government Transfers
= [tex]\frac{0.75}{1-0.75}[/tex] X 80,000
= 3 X 80,000
= $240,000
The total change in real GDP is therefore $240,000. As a result, real GDP grows by $240,000.
(c). The figures above make it quite evident that an increase in government transfers or taxes, as opposed to an increase in government spending, will ultimately have a smaller impact on real GDP.
- $240,000 is the change in real GDP caused by an increase in government transfers.
- $320,000 is the change in real GDP caused by an increase in government purchases.
Learn more about Real GDP: https://brainly.com/question/15682765
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The correct question is:
What is the eventual effect on real GDP if the government increases its purchases of goods and services by $80,000? Assume the marginal propensity to consume (MPC) is 0.75. $ What is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $80,000? Assume the MPC has not changed. $ An increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in an identical eventual effect on real GDP. a smaller eventual effect on real GDP. a larger eventual effect on real GDP. no change to real GDP.
