Question

Suppose that investment demand increases by $200 billion and no leakages occur except household saving. Assume further that households have a marginal propensity to consume of 75 percent.
	Instructions: Enter your responses rounded to one decimal place. a. Compute four rounds of multiplier effects. Changes in This Cycle's Spending Cumulative Change in Spending (in billions) (in billions) First cycle $200.0 $200.0 Second cycle Third cycle Fourth cycle b. What will be the final cumulative impact on spending? billion

Answer 1

Jeegen AI= $200 billiona Cermomulative Sin Spending Big Spending first $200 $200 Second tund $12.5 $65 462.5 $84.375 $56.875 final cummulative impact ognvestment X 1- MPC $200 Billian forth 1 oo loo 4890 x 200 Rillian 0526 $800 Billian Stuce. In first period (BI=AY fence A tu spending will be $200 In Second period only 05 og gutortte is consumed. Therefore 0.75 X 200 = $150 This will continue centil ny=$800 Billion CS Scanned with CamScanner