alundriaf9632 alundriaf9632
  • 01-07-2021
  • Business
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a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion

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Parrain
Parrain Parrain
  • 02-07-2021

Answer: $2.5 billion

Explanation:

You need to first calculate the multiplier.

The multiplier is the amount that shows the effect of an increase in government spending on the aggregate demand of a country.

It is calculated as:

= 1 / ( 1 - MPC)

= 1 / ( 1 - 0.9)

= 10

Increase in aggregate demand = Government spending * multiplier

25 billion = G * 10

G = 25 billion / 10

= $2.5 billion

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