Question

I'm doing homework for macroeconomics and I need to know how to do algebra problems using the multiplier. How does a change in autonomous spending or a change in planned investment affect production (Y). Here is the equation I was instructed to use. Y= (1/1-mpc) (A + Iplanned)

Answer 1

Y = (A + I_P/)(1 - MPC)

Y/A = 1/(1 - MPC)

Y =  A/(1 - MPC)

A change in autonomous spending will affect production by A/(1 - MPC)

Similarly

Y/I_P = 1/(1 - MPC)

Y =  I_P/(1 - MPC)

A change in planned  spending will affect production by  I_P/(1 - MPC)