Investment increases by $200 million and the value of MPC is 0.75. What would be the...

Question

Question

Answer 1

Answer #1

if the MPC is 0.75 then the multiplier will be 1 / 1 - 0.75 = 4.

An increase in the investment by $200 million will increase the spending by 200 x 4 = 800 million. The answer is "B".

Answer 2

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