(Steps Shown) QUESTION: (10%) Using an MPC of 0.80, the impact of $100 spent the government will be as follows: Spending Cycles Change in Spending during
QUESTION: (10%)
Using an MPC of 0.80, the impact of $100 spent the government will be as follows:
| Spending Cycles |
Change in Spending
during Cycle (billions per year) |
Cumulative Increases in Spending
(billions per year) |
| 1 | $100 | $100 |
| 2 | 80 | 180 |
| 3 | 64 | 244 |
| 4 | 51.2 | 295.2 |
| 5 | 40.9 | 336.1 |
- Recompute the first five cycles using an MPC of 0.90.
- How much more consumption occurs after the first five cycles?
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