An increase in spending by $5 bilion will add OA drectly to isposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect. OB. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 bilion times the simple multiplier. OC. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, Le. national income will change by less than $5 billion.

An increase in spending by $5 bilion will add OA drectly to isposable income by this amount and cause an increase in national income equal to less than $5 billion due to the multiplier effect. OB. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 bilion times the simple multiplier. OC. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. OD. indirectly to disposable income, only a fraction of which (determined by the MPC) will then be spent, Le. national income will change by less than $5 billion.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 6.13P

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