WILL MARK BRAINLIEST// PLEASE HELP ASAP <3

Suppose that a certain country has an MPC of 0.9 and a real GDP of $500 billion. If government decreases taxes by $4 billion, what will be its new level of real GDP?

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18-10-2021
Business

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WILL MARK BRAINLIEST// PLEASE HELP ASAP <3

Suppose that a certain country has an MPC of 0.9 and a real GDP of $500 billion. If government decreases taxes by $4 billion, what will be its new level of real GDP?

Respuesta :

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Tundexi Tundexi · Answer 1 · 2021-10-29T17:59:32+02:00

The new level of the GDP will be $536 billion.

The Real GDP refers to an inflation-adjusted GDP that shows the value of all goods and services produced within the country's border.

We are given that the Marginal Propensity to Consume (MPC) is 0.90

The formula for Tax multiplier is -MPC/(1-MPC)

Tax multiplier = -0.9/(1-0.9)

Tax multiplier = -0.9 / 0.1

Tax multiplier = -9

Now, the change in GDP if the taxes decreased by 4 billion will be $36 billion [-9*(-$4 billion)].

Now, because the change is positive, then, its implies that the Real GDP will increase.

The formula for New GDP is [Initial Real GDP + Change in GDP]

New GDP = $500 billion + $36 billion

New GDP = $536 billion

Therefore, the new level of the certain country real GDP is $536 billion.

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WILL MARK BRAINLIEST// PLEASE HELP ASAP <3 Suppose that a certain country has an MPC of 0.9 and a real GDP of $500 billion. If government decreases taxes by $4 billion, what will be its new level of real GDP?

Respuesta :

Otras preguntas

WILL MARK BRAINLIEST// PLEASE HELP ASAP <3

Suppose that a certain country has an MPC of 0.9 and a real GDP of $500 billion. If government decreases taxes by $4 billion, what will be its new level of real GDP?