Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will
1 answer:
Answer:
$50 billion
Explanation:
The net effect on aggregate demand of the additional investment spending will be derived by multiplying the increased spending by the Multiplier.
Where MPC is the marginal propensity to consumer, and
MPS, the marginal propensity to save.
Therefore the multiplier = = 2.5
Accordingly, the increase in aggregate demand as a result of the increase in the investment
= 2.5 * $20 billion
= $50 billion
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