Suppose Lower Interest Rates Suddenly Lead to an Injection of $325

question 27

Multiple Choice

Suppose lower interest rates suddenly lead to an injection of $325 additional investment spending into the economy and the marginal propensity to consume is 0.80.Complete Table 10.1 by calculating the spending cycles as the increased investment spending works its way through the economy. $\begin{array}{lll} & \text { Change in this Cycle's } & \text { Cumulative Increase in } \\\text { Spending Cvcles } & \text { Spending and Income } & \text { Spending and Income }\\\hline\text { First-cycle spending }&\$325&\$325\\\text { Second-cvele spending }&\_\_\_&\_\_\_\\\text { Third-cycle spending }&\_\_\_&\_\_\_\end{array}$

$\text { Table } 10.1$ In Table 10.1,what is the change in the second cycle of spending resulting from the higher initial investment?

• A)$65.
• B)$1,625.
• C)$325.
• D)$260.

Distinguish between perfectly inelastic and perfectly elastic demand curves.

Recognize how the availability of substitutes affects the elasticity of demand.

Understand the concept of cross elasticity of demand and its implications for goods being substitutes or complements.

Identify the determinants of the elasticity of demand.

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Definitions:

Mutation

A permanent alteration in the DNA sequence that makes up a gene, which can result in a change in the phenotype of an organism.

Reproductive Isolating Mechanisms

Reproductive isolating mechanisms are biological features of organisms that prevent species from interbreeding, thereby maintaining species separateness.

Interbreeding

The mating or crossing of two individuals from different populations, species, or varieties, leading to the production of offspring.

Species

A group of organisms capable of interbreeding and producing fertile offspring, sharing common characteristics and genetic makeup.