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

6 December, 13:22

+3

Answers (1)

Know the Answer?

Sariah · 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