As a result of the decrease in investment spending, the real GDP will change by -$500 billion.
How much will real GDP change by?
The decrease will depend on the multiplier which is found as:
= 1 / ( 1 - Marginal propensity to consume)
= 1 / (1 - 0.8)
= 1 / 0.2
= 5
The change will be:
= Decrease in spending x multiplier
= - 100 x 5
= -$500 billion
In conclusion, real GDP will decrease by $500 billion.
Find out more on Marginal propensity to consume at https://brainly.com/question/17930875.
