Solution:
The correct answer is 150 units
MPC = 0.8
First, calculate the spending multiplier:
Spending Multiplier =
Spending Multiplier = 5
Calculate the change in equilibrium income:
= (50 ΔG 5) + (20 ΔI -5) = 250 – 100 = 150 units
The equilibrium income will change by 150 units
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