Question: how to calculate change in real gdp with mpc?
Answer: Step 1: Calculate the Multiplier. In this case, 1 ÷ (1 – MPC) = 1 ÷ (1 – 0.80) = 1 ÷ (0.2) = 5. Step 2: Calculate the Increase in Spending. Since the initial increase in spending is $10 million and the multiplier is 5, this is simply: ...  Step 3: Add the Increase to the Initial GDP.