If the marginal propensity to save is 0.68 and the initial decline in in investment is $580, 429.20 will be decrease in aggregate demand.
<h3>What is Aggregate Demand?</h3>
Aggregate demand is a measure of aggregate demand for all finished goods and services produced in an economy. Aggregate demand is expressed as the total amount exchanged for those goods and services at a particular price level and point in time.
<h3>Calculating the problem:</h3>
Multiplier= 1/(MPS+MPI)=1/(0.68+0.68)=1/1.36= 0.74
Fall in Aggregate demand= Multiplier ×Change in investment
=$ 0.74× $580
= 429.2 billion.
<h3> What determines aggregate demand?</h3>
Aggregate demand is the sum of four factors: Consumption, investment, government spending, net exports. Consumption can change for a variety of reasons, including income fluctuations, taxes, expectations of future income, and changes in wealth levels.
Learn more about aggregate demand:
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