(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
For the final part, you are asked to measure the effect of a decrease in autonomous consumer spending on equilibrium GDP.
(Description)
The problem is presented. In an economy without government purchases, transfers, or taxes, and without imports or exports, aggregate autonomous consumer spending is 500 billion dollars, planned investment spending is 250 billion dollars, and the marginal propensity to consume is 0.5. How will Y asterisk change if autonomous consumer spending falls to 450 billion dollars?
(Speaker)
If autonomous consumer spending decreases to 450 billion dollars, which is a decrease of 50 billion dollars, we can use the multiplier to measure the effect on equilibrium GDP. In the last part we found the multiplier was 2, which means for every 1 dollar decrease in autonomous consumer spending, equilibrium GDP will fall by 2 dollars.
(Description)
The formula for delta Y asterisk is presented: delta Y asterisk equals Multiplier times delta of autonomous consumer spending.
(Speaker)
If autonomous consumer spending falls by 50 billion dollars, equilibrium GDP will decrease by 100 billion dollars. Prior to the decrease, equilibrium GDP was 1500 billion dollars. But after the 100 billion decrease, the new equilibrium will occur at 1400 billion dollars.
(Description)
delta Y asterisk equals 2 times minus 50 billion dollars, equals minus 100 billion dollars. Y asterisk equals 1500 billion dollars minus 100 billion dollars, equals 1400 billion dollars.