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    impact on GDP

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    C = 500 + 0.8 Y, I = 400, G = 400, (X - M) = -100

    Solve for GDP.

    What would be the impact on GDP if the government spending increased to 500?

    Why would the increase in GDP be greater than the increase of a $100 increase in government spending?

    © BrainMass Inc. brainmass.com October 9, 2019, 11:37 pm ad1c9bdddf
    https://brainmass.com/economics/macroeconomics/impact-on-immediate-gdp-262172

    Solution Preview

    1. Solve for GDP.
    Substitute C, I, G and (X-M) into the following aggregate demand function:
    Y = C + I + G + (X-M)
    Y = 500 + 0.8 Y + 400 + 400 -100
    0.2Y = 1200
    Y = 6000

    2. What would be the impact on GDP if the government spending increased to 500?
    From C = 500 + 0.8 Y, ...

    Solution Summary

    The expert solves an equation for GDP. The impact on GDP if the government spending increased to 500 is determined. Why the increase in GDP would be greater than the increase of a $100 increase in government spending is determined.

    $2.19