Consider the Simplest Macro Model with Demand-Determined Output

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 $100 million.The marginal propensity to spend in this economy is 0.75.What is the increase in expenditure in this economy during the initial first round of spending?

A) $75 million
B) $25 million
C) $100 million
D) $400 million
E) $500 million