Calculate the total change in spending because of an initial $100 increase in aggregate demand,given that the MPC = 0.60.
A)$100 increase.
B)$100 decrease.
C)$250 increase.
D)$60 increase.

Question

Quizplus · Accepted Answer

The formula to calculate the total change in spending is: 
total change in spending = initial increase in aggregate demand / (1 - MPC)

Using the given values, we get:
total change in spending = 100 / (1 - 0.60) = 250

Therefore, the total change in spending is a $250 increase.

Calculate the Total Change in Spending Because of an Initial