3. Assume that in an economy with an MPC of 0.8 investment increases by $7 billion. By how much will real GDP increase if the economy fully expands

The real GDP will increase by $35 billion if the economy is fully expand.

Explanation:

Marginal propensity to consume (MPC) can be dscribed as the additional expenditure on consumption that is incurred by consumer due to an in national income.

In the question, the following are given:

MPC = 0.8

Increase in investment = $7 billion

We can therefore calculate the multiplier and the amount by which the real Gross Domestic Product (GDP) will increase as follows:

Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.8) = 1 / 0.2 = 5

Amount of increase in GDP =  Increase in investment * Multiplier = $7 billion * 5 = $35 billion.

Therefore, the real GDP will increase by $35 billion if the economy is fully expand.

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.