Suppose that the marginal propensity to consume is 0.8, and investment spending increases by $100 billion. The increase in aggregate demand is: ☐ a) ○ b) $125 billion, composed of $100 billion in investment spending and $25 billion in consumption. $500 billion, composed of $100 billion in investment spending and $400 billion in consumption. c) $100 billion, the amount of investment spending. d) $80 billion, composed of $100 billion in investment spending and a decrease in consumption of $20 billion.
Suppose that the marginal propensity to consume is 0.8, and investment spending increases by $100 billion. The increase in aggregate demand is: ☐ a) ○ b) $125 billion, composed of $100 billion in investment spending and $25 billion in consumption. $500 billion, composed of $100 billion in investment spending and $400 billion in consumption. c) $100 billion, the amount of investment spending. d) $80 billion, composed of $100 billion in investment spending and a decrease in consumption of $20 billion.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 17SQ
Related questions
Question
None
Transcribed Image Text:Suppose that the marginal propensity to consume is 0.8, and investment spending
increases by $100 billion. The increase in aggregate demand is:
☐ a)
○ b)
$125 billion, composed of $100 billion in investment spending and $25
billion in consumption.
$500 billion, composed of $100 billion in investment spending and $400
billion in consumption.
c) $100 billion, the amount of investment spending.
d)
$80 billion, composed of $100 billion in investment spending and a decrease
in consumption of $20 billion.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc