If, in an Economy, a $200 Billion Increase in Consumption

Multiple Choice

If, in an economy, a $200 billion increase in consumption spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the marginal propensity to consume and the multiplier are, respectively,

A) 0.8 and 5.0.
B) 0.4 and 2.5.
C) 0.4 and 1.67.
D) 0.2 and 1.25.