Assume that a nation’s marginal propensity to consume (MPC) is 0.75. A highly productive, cost-cutting technology is developed for the production of commercial airplanes. The total industry expenditure in this nation is $100 million for the immediate acquisition and adoption of this technology.
(a) For this nation, identify and explain how much this spending on new technology will change each of the following in the first round:
i. Income (GDP)
ii. Saving
iii. Consumption
(b) Assuming a closed economy and no leakages, identify and explain how much this spending on new technology will change each of the following at the end of the final round:
i. Income (GDP)
ii. Saving
iii. Consumption