Consider the Simplest Macro Model with Demand-Determined Output

question 107

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 second round of spending?

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

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Definitions:

Mortgage Loan

is a type of loan used to purchase or maintain a home, land, or other types of real estate where the borrower agrees to pay back the lender over a period of time, typically through monthly payments.

Market Value

The current price at which an asset or service can be bought or sold in a fair and open market.

Right To Foreclose

The legal right of a lender or mortgage holder to seize property in the event of nonpayment of debt.

Mortgage Loan

A loan secured by the collateral of some specified real estate property, which the borrower is obliged to pay back with a predetermined set of payments.