Consider the Simplest Macro Model with Demand-Determined Output

question 56

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 eventual total new expenditure in this economy due to the increase in investment?

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

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Definitions:

All-Or-None Response

A neuron’s reaction of either firing (with a full-strength response) or not firing.

Neural Impulses

Electrical signals that travel along neurons, transmitting messages throughout the nervous system.

Sympathetic System

Part of the autonomic nervous system that prepares the body for 'fight or flight' responses, increasing heart rate, dilating airways, and mobilizing energy.

Reuptake

The process by which neurotransmitters are taken back into the neurotransmitter vesicles in the nerve cells after they have been released.