Suppose that an initial $20 billion increase in investment spending expands GDP by $20 billion in the first round of the multiplier process. Also assume that GDP and consumption both rise by $16billion in the second round of the process.

Instructions:Round your answers to 1 decimal place.

a. What is the MPC in this economy?

b. What is the size of the multiplier?

c. If, instead, GDP and consumption both rose by $18 billion in the second round, what would have been the size of the multiplier?