suppose the marginal propensity to consume is 0,6 and investment spending increases by 20 billion. by how much will total production or income change?

To determine the change in total production or income, we need to use the concept of the spending multiplier, which relates changes in investment spending to changes in total production or income.

The spending multiplier is calculated using the formula: Multiplier = 1 / (1 - Marginal Propensity to Consume)

In this case, the marginal propensity to consume (MPC) is given as 0.6. So, the multiplier is: Multiplier = 1 / (1 - 0.6) = 1 / 0.4 = 2.5

With an increase in investment spending of 20 billion, we can calculate the change in total production or income using the multiplier.

Change in Total Production or Income = Multiplier * Change in Investment Spending

Change in Total Production or Income = 2.5 * 20 billion = 50 billion

Therefore, total production or income will change by 50 billion.

To calculate the change in total production or income, we need to use the concept of the multiplier. The multiplier represents the relationship between an initial change in spending and the resulting change in total production or income.

The formula for the multiplier is given by:
Multiplier = 1 / (1 - Marginal Propensity to Consume)

In this case, the marginal propensity to consume (MPC) is given as 0.6. Therefore, the multiplier would be:
Multiplier = 1 / (1 - 0.6) = 1 / 0.4 = 2.5

Now, we can calculate the change in total production or income by multiplying the initial change in spending by the multiplier.

Initial Change in Spending = $20 billion

Change in Total Production or Income = Initial Change in Spending * Multiplier
= $20 billion * 2.5
= $50 billion

Therefore, the total production or income will change by $50 billion.