Calculate the total change in spending because of an initial $100 increase in aggregate demand,given that the MPC = 0.60.
A)$100 increase.
B)$100 decrease.
C)$250 increase.
D)$60 increase.

Question

Quizplus · Accepted Answer

The total change in spending can be calculated using the formula: total change = initial change in spending / (1-MPC). In this case, the initial change in spending is $100 and the MPC is 0.60. Therefore, total change = 100/(1-0.60) = $250 increase.

Calculate the Total Change in Spending Because of an Initial