Suppose that the MPC = 0.8 and that $12 trillion of real GDP is currently being demanded. The government wants to increase real GDP demanded to $13 trillion. By how much would it have to increase government spending to achieve this goal?

Can someone give me the formula for this?

Interestingly, the final answer keeps changing depending on the level of your economics course. If this your first macro-economics then use as simple multiplier. The multiplier is simply 1/MPS, where MPS is the marginal propensity to save = 1-MPC. So in your example, the multiplier = 1/.2 = 5 With a 5 multiplier, how much does govt need to spend to raise GNP by 1-trillion. Take it from here.

Now then, as you advance in econ the simple problem becomes more complicated. Govt cant really just spend more without raising taxes (or printing money). Imposing a tax will greatly reduce the multiplier. But, don't worry about this now.

hello? anyone

To find out how much the government needs to increase spending to achieve a goal, you can use the concept of the spending multiplier. The spending multiplier represents the ratio of the change in real GDP to the change in government spending. In this case, the multiplier can be calculated as 1 divided by the marginal propensity to save (MPS), which is equal to 1 minus the marginal propensity to consume (MPC).

Given that the MPC is 0.8, the MPS can be calculated as 1 - 0.8 = 0.2.

The spending multiplier is therefore 1 / 0.2 = 5.

Now, to find out how much the government needs to increase spending to achieve the desired increase in real GDP, you can use the formula:

ΔG = (ΔY) / Multiplier

Where ΔG is the change in government spending, ΔY is the desired change in real GDP, and Multiplier is the spending multiplier calculated earlier.

In this case, the desired increase in real GDP is $13 trillion - $12 trillion = $1 trillion.

Using the formula, we can calculate:

ΔG = $1 trillion / 5 = $200 billion.

So, the government would need to increase spending by $200 billion to achieve the desired increase in real GDP demanded.