- Words: 433
- Length: 1 Pages
- Topic: Economics
- Paper #: 52741700
Question 4: Please define the oversimplified multiplier and use your knowledge of the concept to answer the following question. Suppose that GDP is currently $25,000 and the marginal propensity to consume is.50. If autonomous investment increases by $5,000, what will GDP be in the new equilibrium? Assume the oversimplified multiplier is accurate.
Any change in a component of aggregate demand will result in a larger change in equilibrium GDP, called the