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In the nation of Foxystan, a $500 decrease in consumer spending typically causes GDP to fall by $5000. The spending multiplier in Foxystan is equal to:

Sagot :

anthougo

Answer:

Foxystan

The spending multiplier in Foxystan is equal to:

10 times.

Explanation:

a) Data and Calculations:

Decrease in consumer spending = $500

Decrease in GDP = $5,000

Spending multiplier in Foxystan is equal $5,000 : $500 = 10 times

The spending multiplier describes the ratio of change in consumer spending relative to the change in the GDP.  In Foxystan, the ratio of the change is 10 times.  This means that while consumer spending decreased by $500, it caused a 10 times decrease in the GDP.

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