Refer to the information provided in Figure 8.11 below to answer the questions that follow. Figure 8.11
-Refer to Figure 8.11. A $10 million increase in investment changes equilibrium output to
A) $240 million.
B) $225 million.
C) $175 million.
D) $90 million.

Question

Refer to the information provided in Figure 8.11 below to answer the questions that follow.  Figure 8.11
-Refer to Figure 8.11. A $10 million increase in investment changes equilibrium output to
A) $240 million. 
B) $225 million. 
C) $175 million. 
D) $90 million.

Quizplus · Accepted Answer

The $10 million increase in investment leads to a larger increase in equilibrium output due to the multiplier effect. The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. If not explicitly given, we assume a multiplier effect that amplifies the initial investment increase. Therefore, the correct answer must reflect a significant increase in output, making $240 million the most plausible outcome given typical multiplier values.

Refer to the Information Provided in Figure 8