Please show me the steps to get this answer, I need to know how to solve similar

Question

Please show me the steps to get this answer, I need to know how to solve similar questions on my final

Given: Consider the following hypothetical economy. The deficit response index (DRI) is -0.1, the economy is producing potential GDP at $1 trillion, and the MPC is 0.5.

Question: Suppose the budget is balanced and the government increases spending by $25 billion. The budget will be in_______.

Answer: A) deficit by $20 billion

Please show me the steps to get this answer, I need to know how to solve similar questions on my final

Explanation / Answer

MPC = 0.50 it means the government spending multiplier is 1/(1-0.5) = 2, which means every dollar spend in government spending will rise the GDP by 2 dollars. For $25 billion it is $50 billions.

[ As , Change in GDP = multiplier*change in government spending = 2*25 = 50 billions]

DRI = -0.1 means every dollar increase in GDP will drop the government deficit by 0.1 dollar. For $50 billion, it is $5 billions. [ 0.1*50 = 5 billions]
However, deficit is measured by government spending - tax revenue. Although the deficit dropped by $5 billions, the government is still spending $500 million for it. So the deficit is $25-$5 = $20 billions, so the deficit increases by $20 billion.

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