THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN)YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOWFOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA:CHANGE IN GDP = [ 1 / (1-MPC) ] * CHANGE IN GInitially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.Then the government decides to increase its spending to $2.7 trillion. Compute the new equilibrium level of output. Assume that the marginal propensity to consume is 0.7 (MPC=0.7).

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ISBN:9781337794985
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Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
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THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN)

YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOW
FOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA:
CHANGE IN GDP = [ 1 / (1-MPC) ] * CHANGE IN G
Initially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.

Then the government decides to increase its spending to $2.7 trillion.

Compute the new equilibrium level of output. 

Assume that the marginal propensity to consume is 0.7 (MPC=0.7).

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