If a $50 Billion Decrease in Investment Spending Causes Income

question 31

Multiple Choice

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round,the multiplier in the economy is:

• A) 2.
• B) 3.33.
• C) 5.
• D) 10.

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Definitions:

Present Value

The present value of a future amount of money or series of cash flows, when calculated with a certain return rate.

Future Dollar Amount

The projected value of a current sum of money at a specified future date, taking into account factors like inflation or investment returns.

Discount Rate

The interest rate used to discount future cash flows to their present value, important in financial analysis and investment decisions.

Lease Payments

Lease payments are regular payments made by a lessee to a lessor for the use of an asset, such as property or equipment, over a specified lease term.