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. $\begin{array}{lll}
& \text { Change in this Cycle's } & \text { Cumulative Increase in } \
\text { Spending Cvcles } & \text { Spending and Income } & \text { Spending and Income }\\hline
\text { First-cycle spending }&-\$240&-\$240\
\text { Second-cvele spending }&\_\_\_&\_\_\_\
\text { Third-cycle spending }&\_\_\_&\_\_\_
\end{array}$

$\text { Table } 10.2$ 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. $\begin{array}{lll} 
& \text { Change in this Cycle's } & \text { Cumulative Increase in } \
\text { Spending Cvcles } & \text { Spending and Income } & \text { Spending and Income }\\hline
\text { First-cycle spending }&-\$240&-\$240\
\text { Second-cvele spending }&\_\_\_&\_\_\_\
\text { Third-cycle spending }&\_\_\_&\_\_\_
\end{array}$

$\text { Table } 10.2$ 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 by multiplying the marginal propensity to consume (0.75) by the change in the second cycle's spending. The second cycle's spending change is -$180 (0.75 * -$240). Therefore, the third cycle's spending change is 0.75 * -$180 = -$135.

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