Question: 5. How are changes in the MPC, changes in the MPS, and the size of the multiplier related? Answer the following questions: a. What is

5. How are changes in the MPC, changes in the MPS, and the size of the multiplier related?

Answer the following questions:

a. What is the multiplier if the MPC is 0?

0.33? 0.90?

b. Suppose the equilibrium real GDP is

$100 billion and the MPC is 4/5. How much will the equilibrium output change if businesses increase their level of investment by $10 billion?

c. Using the data given in question 5(b), what will be the change in equilibrium real GDP if the MPC equals 2/3?

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