An autonomous increase in aggregate spending of $100 million

Explanation:

A change in autonomous spending of $100 million, with an MPC of 0.8, would lead to a total increase in real GDP of $400 million. This can be calculated by multiplying the change in spending by the spending multiplier, which is 1 divided by the marginal propensity to save (MPS). In this case, the MPS is 0.2, so the spending multiplier is 1/0.2 = 5. Therefore, $100 million multiplied by 5 equals $500 million.

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