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:

Aboriginal Peoples

Indigenous individuals and communities who are native to a land or country, especially those recognized as such in countries like Canada, Australia, and others.

Primary Sector

The sector of an economy involving the extraction and harvesting of natural resources directly from the earth, such as agriculture, mining, and forestry.

Tertiary Sector

This term refers to the sector of an economy focused on services rather than the production of goods, including areas such as retail, entertainment, and financial services.

Secondary Sector

The part of the economy that includes industries involved in the processing, transformation, fabrication, or construction of materials and products from raw materials.