In the Simple Keynesian Model with No Government and Foreign

Multiple Choice

In the simple Keynesian model with no government and foreign sectors,assume that the economy is in equilibrium at an output of $2 billion with a marginal propensity to consume of 0.9.If investment spending decreases by $0.05 billion,what is the new equilibrium output level?

A) $1.95 billion
B) $2.5 billion
C) $1.9 billion
D) $1.5 billion