An Economy Saves 20 Percent of Any Increase in Income

question 5

Multiple Choice

An economy saves 20 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $2 billion leads to a short run increase in real GDP of

• A) $2 billion.
• B) $10 billion.
• C) $0.4 billion.
• D) $1.6 billion.