-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. In Table 10.1,what is the cumulative increase in expenditure by the end of the second cycle?
A)$585.
B)$390.
C)$260.
D)$65.

Question

-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. In Table 10.1,what is the cumulative increase in expenditure by the end of the second cycle?
A)$585. 
B)$390. 
C)$260. 
D)$65.

Quizplus · Accepted Answer

The cumulative increase in expenditure by the end of the second cycle is $585. This is calculated by adding the increased investment spending of $325 to the induced consumption spending of $260.

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