ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$1, 000 increase
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$500 decrease
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$2, 000 increase
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$800 decrease
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$0
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Detailed explanation-1: -Real GDP can be calculated by taking the difference between the most recent year’s real GDP and the prior year’s real GDP. Then, divide this difference by the prior year’s real GDP. Alternatively, real GDP can be determined if nominal GDP and the prevailing inflation rate are known.
Detailed explanation-2: -To calculate the maximum change in GDP, use the spending multiplier. The formula for the spending multiplier is 1/MPS or 1/(1-MPC). In the example above, the multiplier would be 5 (1/. 2).
Detailed explanation-3: -Real gross domestic product (GDP) increased at an annual rate of 2.7 percent in the fourth quarter of 2022, after increasing 3.2 percent in the third quarter.
Detailed explanation-4: -The formula for GDP is: GDP = C + I + G + (X-M). C is consumer spending, I is business investment, G is government spending, and (X-M) is net exports.