The formula is used in economics to determine the impact on Gross Domestic Product (GDP) X by increasing government spending by D dollars if the proportion of additional income that people spend is h.

(a) Solve the formula for h.

(b) Find h if the government increased spending by $400 billion and GDP increased by $4000 billion.

Question

Monica

8 August, 08:13

+4

Answers (1)

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Andrea Hood · Answer 1

X = D / (1 - h)

1 - h = D/x

h = 1 - D/x

D = 400, X = 4000

h = 1 - 400/4000

h = 1 - 0.1 = 0.9