Multiple Choice
Consider the simplest macro model with demand-determined output.Suppose an increase in business confidence leads firms to increase investment in new equipment by $3.5 billion.The marginal propensity to spend in this economy is 0.6.What is the eventual total new expenditure in this economy due to the increase in investment?
A) $2.1 billion.
B) $5.8 billion.
C) $3.5 billion.
D) $7.0 billion.
E) $8.75 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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