As a result of the Coronavirus pandemic, Australian consumers have become increasingly pessimistic about their future job prospects and have decided to save more of every new dollar of income.

If the Federal Treasury estimates Australia's marginal propensity to save (MPS) to equal 0.35, then what is the value of Australia's marginal propensity to consume (MPC)?

What would be the value of the government purchases multiplier and by how much would equilibrium Real GDP (RGDP)

(Your answers should also include the formula you used and show your workings)

Marginal Propensity to Consume (MPC) =

Government purchases multiplier =

Increase in equilibrium real GDP =

 Increase if the initial increase in government purchases was $20 billion?

Answer rating: 100% (QA)

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