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.
Chapter9: The Keynesian Model In Action
Section: Chapter Questions
Problem 13SQ
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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.
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