If the marginal propensity to consume is 0.75 and government purchases of goods and services decrease by $20 billion, real gdp will decrease by $15 billion.
The marginal propensity to consume is the proportion of the income of a country that is spent on consumption and not on income.
The marginal propensity to consume = amount spent on consumption / real GDP.
Real GDP is the value of the goods and services that is produced by a country that has been adjusted for inflation. Government purchases and Real GDP have a direct relationship. Thus, if government purchases declines, the Real GDP would decline.
Real GDP = marginal propensity to consume x government purchases
0.75 x $20 billion = $15 billion
To learn more about marginal propensity to consume, please check: https://brainly.com/question/19089833
#SPJ1
