ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$0
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$5, 000 increase
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$4, 000 decrease
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$6, 000 increase
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$2, 000 increase
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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: -GDP Formula The formula for calculating GDP with the expenditure approach is the following: GDP = private consumption + gross private investment + government investment + government spending + (exports – imports).
Detailed explanation-4: -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.