Suppose Aggregate Output Is Demand- Determined

question 85

Multiple Choice

Suppose aggregate output is demand- determined. If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending, then equilibrium income will and the marginal propensity to spend must equal .

• A)increase by $40 billion; 0.75
• B)decrease by $10 billion; 0.25
• C)increase by $10 billion; 4.0
• D)increase by $40 billion; 0.25
• E)decrease by $40 billion; 0.75

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