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. $\begin{array}{lll}
& \text { Change in this Cycle's } & \text { Cumulative Increase in } \
\text { Spending Cvcles } & \text { Spending and Income } & \text { Spending and Income }\\hline
\text { First-cycle spending }&\$325&\$325\
\text { Second-cvele spending }&\_\_\_&\_\_\_\
\text { Third-cycle spending }&\_\_\_&\_\_\_
\end{array}$

$\text { Table } 10.1$ 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. $\begin{array}{lll} 
& \text { Change in this Cycle's } & \text { Cumulative Increase in } \
\text { Spending Cvcles } & \text { Spending and Income } & \text { Spending and Income }\\hline
\text { First-cycle spending }&\$325&\$325\
\text { Second-cvele spending }&\_\_\_&\_\_\_\
\text { Third-cycle spending }&\_\_\_&\_\_\_
\end{array}$

$\text { Table } 10.1$ 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 second-cycle spending is $325 * 0.80 = $260. The cumulative increase by the end of the second cycle is $325 + $260 = $585.

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