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Determine sizes of the MPC- the MPS and the multiplier

Refer to the table below in answering the questions which follow:

725_inflationary expenditure gap or recessionary expenditure gap.png

Suppose that investment, net exports and government expenditures do not modify with changes in real GDP, determine the sizes of the MPC, the MPS, and the multiplier?

 

 

E

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MPC = .8 (= $40 billion/$50 billion); MPS = .2 (= 1 -.8); multiplier = 5 (= 1/.2).

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