# QUESTION 1 The multiplier – calculating hypothetical changes in GDP Go to the Bureau of Economic Analysis at http://www.

QUESTION 1 The multiplier – calculating hypothetical changes in GDPGo to the Bureau of Economic Analysis at http://www.bea.gov, and use the BEA interactivity feature to select National Income and Product Account Tables. Then find Table 1.1.5, which contains the most recent quarterly values for nominal GDP (use the data for second and third quarters for 2011). Assume that the MPC is .75 and that, for each of the following, the values of the initial variables are those you just discovered. Determine the new value of GDP if, other things equal, (a) investment increased by 5 percent, (b) imports increased by 5 percent while exports increased by 5 percent, (c) consumption increased by 5 percent, and (d) government spending increased by 5 percent. Create a table showing both the origional values and the new values you have calculated. Which of the changes, (a) through (d), cause the greatest change in GDP in absolute dollars?