In discussing the multiplier for government spending, Wendy Edelberg and Louise Sheiner, economists at the Brookings Institution, write: “The impact on GDP of an additional dollar of federal aid—whether to people, businesses, or state and local governments—depends on how much and how quickly each received dollar is spent (known as the Marginal Propensity to Consume, or MPC).”

a. What do they mean by “impact on GDP”?

b. What is the MPC? Why would the impact on GDP of an increase in federal spending depend on the MPC?