##### If the local marginal propensity to consume is 0.8, by how much has increased investment spending ra

 Economics Tutor: None Selected Time limit: 1 Day

gold miners and celebrity gawkers, local businesses and some national chains have increased investment spending by \$5 mil, building everything from motels to big box stores.      If the local marginal propensity to consume is 0.8, by how much has increased investment spending raised local gross domestic product and income?

Jul 22nd, 2015

Thank you for the opportunity to help you with your question!

This is the question on multiplier effect

Output multiplier = 1/(1-marginal propensity to consume) = 1/(1-0.8) = 5    .......( output multiplier)

increased investment = \$ 5 million

therefore, increased gross domestic product and income = output multiplier X increased investment = 5 x \$5 mil

increased gross domestic product and income = \$25 million (Answer)

Please let me know if you need any clarification. I'm always happy to answer your questions. Kindly best this answer if it has helped you.
Jul 22nd, 2015

...
Jul 22nd, 2015
...
Jul 22nd, 2015
Dec 4th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer