Question

DIRK AND LEE'S PICK v 1st attempt See Hint Suppose the government injects $1,000 into the economy and the marginal propensity to consume ( MPC) is 0.7. The initial round of spending adds $1,000 to the economy, while round 2 adds $ and round 3 adds S <.33/50 > 31 OF 50 QUESTIONS COMPLETED hp

Answer 1

Round 2 = 700

Round 3 = 490

MPC is 0.7 means that 70% percent of the income will be used in consumption.

So in first round increase in $1000 will add to the economy $1000.

In second round this will add = 1000×70/100 = 700

In third round this will add = 700×70/100 = 490.

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