Suppose that investment demand increases by $400 billion and no leakages occur except household saving. Assume further that households have a marginal propensity to consume of 75 percent. Instructions: Round your responses to one decimal place. a. Compute four rounds of multiplier effects. Changes in This Cycle's Spending (in billions) $400.0 Cumulative Change in Spending (in billions) $400.0 First cycle Second cycle Third cycle Fourth cycle b. What will be the final cumulative impact on spending? billion

Suppose that investment demand increases by $400 billion and no leakages occur except household saving. Assume further that households have a marginal propensity to consume of 75 percent. Instructions: Round your responses to one decimal place. a. Compute four rounds of multiplier effects. Changes in This Cycle's Spending (in billions) $400.0 Cumulative Change in Spending (in billions) $400.0 First cycle Second cycle Third cycle Fourth cycle b. What will be the final cumulative impact on spending? billion

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter8: Aggregate Demand And The Powerful Consumer

Section: Chapter Questions

Problem 8DQ

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For parts B, C, D, E