Assume the marginal propensity to consume is 0.8. If consumer spending rises by $20 billion, then total income through the multiplier effect will:   Increase by $100 billion   Decrease by $100 billion   Increase by $10 billion   Will not change   How do I calculate this?

Economics For Today
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ISBN:9781337613040
Author:Tucker
Publisher:Tucker
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 11SQ
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Assume the marginal propensity to consume is 0.8. If consumer spending rises by $20 billion, then total income through the multiplier effect will:

 
  1. Increase by $100 billion

     
  2. Decrease by $100 billion

     
  3. Increase by $10 billion

     
  4. Will not change

     

    How do I calculate this?

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