Suppose Aggregate Output Is Demand-Determined

Multiple Choice

Suppose aggregate output is demand-determined.If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending,then equilibrium income will ________ and the marginal propensity to spend must equal ________.

A) decrease by $40 billion; 0.75
B) decrease by $10 billion; 0.25
C) increase by $40 billion; 0.25
D) increase by $40 billion; 0.75
E) increase by $10 billion; 4.0