Question

Suppose the government in this economy decides to decrease government purchases by $250 billion. the decrease in government purchases will lead to a decrease in income, generating an initial change in consumption equal to-$62.5 billion . this decreases income yet again, causing a second change in consumption equal to . the total change in demand resulting from the initial change in government spending is

Answer 1

              1 187.5 or 250x0.75
2.140.6 or 187.5x0.75
3. 1 trillion or 250x1/0.25