The government spending multiplier would be effectively set to 1.0.
What is a government spending multiplier?
According to the multiplier effect theory, increases in private expenditure that are also meant to stimulate the economy are brought about by government spending. The fundamental tenet of the idea is that increased household income brought on by government spending results in more consumer spending.
How do you calculate government spending multiplier?
Either the MPC or the MPS can be used to compute the spending multiplier.
1/1-MPC or 1/MPS as the multiplier
What is government spending formula?
GDP is calculated using the following formula: GDP = C + I + G + (Ex - Im), where "C" stands for consumer spending, "I" for business investment, "G" for government spending, and "(Ex - Im)" for net exports, or the sum of exports and imports.
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