the formula to compute the spending multiplier isSolutionSpe

the formula to compute the spending multiplier is:

Solution

Spending multiplier= Change in equilibrium real GDP/ initial change in autonomous spending.

This multiplier shows how much economy\'s output can rise with an increase in spending.

This change in spending could be change in consumption, investment,govt spending and net exports.

Formula for spending multiplier= 1/(1-MPC) or 1/MPS; where MPC is maginal propensity to consume.