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Sagot :
Answer: $375 billion.
Explanation:
Using the MPC, one can calculate a multiplier that shows how much GDP changes when there is a change in investment.
Multiplier = 1 / ( 1 - MPC)
= 1 / (1 - 0.8)
= 1 / (0.2)
= 5
Change in GDP = change in investment spending * multiplier
= -5 billion * 5
= -$25 billion
New level of GDP = 400 - 25
= $375 billion.
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