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11 June, 02:51

Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will the change in investment increase aggregate demand? Question 5 options: A) $12 billion B) $33.3 billion C) $20 billion D) $50 billion

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  1. 11 June, 04:11
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    option (D) $50 billion.

    Explanation:

    Data provided in the question:

    Additional investment spending = $20 billion

    MPC = 0.6

    Now,

    Increase in aggregate demand = [1 : (1 - mpc) ] * Investment

    or

    Increase in aggregate demand = [1 : (1 - 0.4) ] * $20 billion

    or

    Increase in aggregate demand = (1 : 0.4) * $20 billion

    or

    Increase in aggregate demand = 2.5 * $20 billion

    or

    Increase in aggregate demand = $50 billion

    Hence.

    the correct answer is option (D) $50 billion.
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Home » Business » Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will the change in investment increase aggregate demand? Question 5 options: A) $12 billion B) $33.
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