THE MULTIPLIER CALCULATING HYPOTHETICAL CHANGES IN GDP Go to the Bureau of Economic Analysis at wwwbeagov and select Interactive Data Tables which is listed
THE MULTIPLIER—CALCULATING HYPOTHETICAL CHANGES IN GDP
Go to the Bureau of Economic Analysis at www.bea.gov, and select Interactive Data Tables, which is listed under Publications. On that page, select National Income and Product Accounts. Go to the List of All NIPA Tables and then find Table 1.1.5, which contains the most recent values for nominal GDP = Ca + Ig + G + (X -M). Assume that the MPC is .75 and that, for each of the following, the values of the initial variables are those you just discovered. Determine the new value of GDP if, other things equal,
(a) investment increased by 5 percent,
(b) imports increased by 5 percent while exports increased by 5 percent,
(c) consumption increased by 5 percent, and (d) government spending increased by 5 percent. Which of the changes,
(a) through ( d), caused the greatest change in GDP in absolute dollars?