-Suppose lower expectations lead to a decrease of $240 in desired investment in the economy and the marginal propensity to consume is 0.75.Complete Table 10.2 by calculating the spending cycles as the impact of the decreased investment spending works its way through the economy. In Table 10.2,what is the change in the third cycle of spending resulting from the initial drop in investment?
A)-$135.00.
B)-$180.00.
C)-$420.00.
D)-$555.00

Question

-Suppose lower expectations lead to a decrease of $240 in desired investment in the economy and the marginal propensity to consume is 0.75.Complete Table 10.2 by calculating the spending cycles as the impact of the decreased investment spending works its way through the economy. In Table 10.2,what is the change in the third cycle of spending resulting from the initial drop in investment?
A)-$135.00. 
B)-$180.00. 
C)-$420.00. 
D)-$555.00

Quizplus · Accepted Answer

The change in the third cycle of spending is calculated as the initial change in investment multiplied by the marginal propensity to consume raised to the power of the cycle number. Thus, it is $240 * 0.75^3 = $135.00.

-Suppose Lower Expectations Lead to a Decrease of $240 in Desired