Suppose the government increases expenditures by $10 billion and the marginal propensity to consume is 0.50. by how much will equilibrium gdp change? the change in equilibrium gdp is: $ nothing billion.

$20 billion

Explanation:

Data provided in the question:

Increase in government expenditure = $10 billion

Marginal propensity to consume, MPC = 0.50

Now,

Multiplier = 1 ÷ (1 - MPC)

or

Multiplier = 1 ÷ (1 - 0.50)

or

Multiplier = 2

thus,

Change in equilibrium GDP ($ billion)

= Increase in government expenditure × Multiplier

= $10 billion × 2

= $20 billion

answer; ///retained