QQuestionEconomics
QuestionEconomics
"If the MPC (Marginal Propensity to Consume) is 0.8, what change in investment spending is required to effect a total change in income of 60 billion?
A. 12 billion
B. 15 billion
C. 20 billion
D. 25 billion"
6 months agoReport content
Answer
Full Solution Locked
Sign in to view the complete step-by-step solution and unlock all study resources.
Step 1I'll solve this macroeconomics problem step by step using the specified LaTeX formatting guidelines:
Step 2: Understand the Key Economic Concept
In this problem, the MPC is $$0.8$$, meaning for every additional dollar of income, 80 cents are consumed.
The Marginal Propensity to Consume (MPC) represents the proportion of additional income that is spent rather than saved.
Final Answer
Key Insights: - The multiplier amplifies the initial change in investment - Higher MPC leads to a larger multiplier effect - This demonstrates how changes in investment can impact total income
Need Help with Homework?
Stuck on a difficult problem? We've got you covered:
- Post your question or upload an image
- Get instant step-by-step solutions
- Learn from our AI and community of students