Answer:
$250 million
Explanation:
From the question, we are given that
The MPC is 0.8
Decrement in spending by the government happens to be $50 million
Decrement in equilibrium GDP thus is
Decrement in GDP = Decrement I'm spending / (1 - MPC)
Decrement in GDP = $50 million / (1 - 0.8)
Decrement in GDP = $50 million / 0.2
Decrement in GDP = $250 million
Therefore, we can then conclude that the equilibrium GDP will decrease by $250 million
