DP Economics Questionbank

Calculate the maximum possible increase in gross domestic product (GDP) that could result from the rise in investment.

Country Delta is an open economy with a government sector. Investment rises by $2 billion in both Delta and Beta. Explain how the size of the multiplier and the resulting effect on gross domestic product (GDP) might be different in the two countries.

Using the concept of the multiplier, explain how an increase in investment might affect aggregate demand.

Using this information, calculate the value of the Keynesian multiplier.

Using your answer to part (i), calculate the increase in government spending necessary to increase nominal GDP by $100 billion.

Explain the effect an increase in investment might have on real gross domestic product (GDP) using the Keynesian multiplier.

Gardia’s investment (in plant and equipment) increased by 11 million gamma in the last month. In the same month, its government spending decreased by 8 million gamma. It has been estimated that the marginal propensity to consume (MPC) on domestic goods and services in Gardia is 0.75.

Calculate the maximum possible increase in real gross domestic product (GDP) in Gardia that could result from the changes in investment and government spending.

Calculate the estimated value of the multiplier used by the economist.

Calculate the estimated value of the multiplier used by the economist.