Consider the Simplest Macro Model with Demand-Determined Output

question 23

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 $30 million.The marginal propensity to spend in this economy is 0.9.What is the eventual total new expenditure in this economy due to the increase in investment?

• A)$3 million
• B)$30 million
• C)$27 million
• D)$270 million
• E)$300 million

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Definitions:

Check Register

A record maintained by account holders to track checks written, deposits made, and the current balance of a checking account.

Cash Balance

The amount of cash that a company or an individual has on hand at any given time.

Deposits

Funds placed into an account at a financial institution for safekeeping.

Adjusted Cash Balance

The cash balance reported on a company's financial statements, modified for checks that have not yet cleared or deposits in transit.