> Suppose that the marginal propensity to consume is 0.8, and investment spending increases by $100 billion.?

Suppose that the marginal propensity to consume is 0.8, and investment spending increases by $100 billion.?

Posted at: 2014-12-05 
My friend, you placed your question in the wrong forum of Yahoo Answers. This is the Business & Finance category and you are unlikely to get a reliable answer here, since yours is strictly a mathematical/statistical question. Try the question again in the category 'Science & Mathematics,' subcategory 'Mathematics,' that's where the experts for your problem are.

A) $100 billion, the same amount as investment spending.

B) $125 billion, composed of $100 billion in investment spending and $25 billion in

consumption.

C) $80 billion, composed of $100 billion in investment spending and a decrease in

consumption of $20 billion.

D) $500 billion, composed of $100 billion in investment spending and $400 billion in

consumption.

It says the answer is D but I don't know why.