The fiscal tool used in combating recession is by increasing government's spending. It can alter Aggregate Demand (AD) to shift to the right. If government decides to increase spending by (increase in G) by RM100 Billion and given Marginal Propensity to Consume (MPC) is 80% (0.8), then, what is the value of multiplier? How much Spending Multiplier that would give effect to AD? Please provide calculation on your answer.

Answer rating: 100% (QA)

The spending multiplier M calculated using the formul... View the full answer