Calculating Expected Increase in GDP from Government Spending on PPE

How much is the total expected increase in GDP from the government spending $100 million on PPE?

The expected increase in GDP as a result of the government spending $100 million on PPE is $500 million.

Understanding the Calculation:

To calculate the expected increase in GDP, we can use the government spending multiplier formula: GDP increase = Government spending * (1 / (1 - MPC)) When the government spends $100 million on Personal Protective Equipment (PPE) as part of the CARES Act, and the Marginal Propensity to Consume (MPC) is 0.8, we can substitute these values into the formula: GDP increase = $100 million * (1 / (1 - 0.8)) GDP increase = $100 million * (1 / 0.2) GDP increase = $100 million * 5 GDP increase = $500 million Therefore, the expected increase in GDP due to the government spending $100 million on PPE is $500 million.
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