Suppose Consumer Confidence Declines and as a Result,consumer Spending Decreases

question 5

Multiple Choice

Suppose consumer confidence declines and as a result,consumer spending decreases by $4 billion dollars.Other things equal,if households spend $0.75 of each extra dollar of income and save the remaining $0.25,by how much will spending decrease during the first round through the circular flow?

• A) $1 billion
• B) $2.25 billion
• C) $3 billion
• D) $4 billion

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