Question

If the mpc = 0.9 and the government raises purchases (g) by $100 billion, then gdp will:_________

Answer 1

GDP will increase by less than $1 trillion if the MPC is 0.9 and government transfers rise by $100 billion.

government transfer payment, sometimes known as a government transfer or just a transfer, is a redistribution of income and wealth carried out by the government by the payment of one amount to another without the exchange of goods or services. Because they do not directly consume resources or produce output, these payments are regarded as non-exhaustive.  Welfare, financial assistance, social security, and government subsidies for particular industries are a few examples of transfer payments. The transfer payment consists of a donor and a recipient, with the donor giving up something of value without receiving anything, in contrast to the exchange transaction, which benefits all parties involved.

Learn more about government transfers here

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