How would i approach this question? I don't necessarily want an answer. A "how to" would be better.

(Simple Spending Multiplier) For each of the following values for the MPC, determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion decrease in spending:
a. MPC = 0.9
b. MPC = 0.75
c. MPC = 0.6

To approach this question, you need to understand the concept of the simple spending multiplier and how to calculate it.

The simple spending multiplier measures the change in real GDP demanded as a result of a change in spending. It indicates how much the GDP will change for every unit change in spending. The formula to calculate the simple spending multiplier is:

Multiplier = 1 / (1 - MPC)

where MPC stands for the Marginal Propensity to Consume. MPC represents the portion of additional income that households will spend on goods and services.

To find the total change in real GDP demanded following a $10 billion decrease in spending, you need to multiply the decrease in spending by the simple spending multiplier.

Here's how to approach each part of the question:

a. MPC = 0.9
1. Calculate the simple spending multiplier: Multiplier = 1 / (1 - 0.9) = 1 / 0.1 = 10.
2. Calculate the total change in real GDP demanded: Change in GDP = Multiplier * Change in spending = 10 * (-10 billion) = -100 billion.

b. MPC = 0.75
1. Calculate the simple spending multiplier: Multiplier = 1 / (1 - 0.75) = 1 / 0.25 = 4.
2. Calculate the total change in real GDP demanded: Change in GDP = Multiplier * Change in spending = 4 * (-10 billion) = -40 billion.

c. MPC = 0.6
1. Calculate the simple spending multiplier: Multiplier = 1 / (1 - 0.6) = 1 / 0.4 = 2.5.
2. Calculate the total change in real GDP demanded: Change in GDP = Multiplier * Change in spending = 2.5 * (-10 billion) = -25 billion.

By following these steps, you can determine the size of the simple spending multiplier and the total change in real GDP demanded for each given value of MPC.