If in an economy a $150 billion increase in investment spending creates $150 billion of new income in the first round of the multiplier process and $105 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively,

If in an economy a $150 billion increase in investment spending creates $150 billion of new income in the first round of the multiplier process and $105 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively,

A) 5.00 and 0.80
B) 4.00 and 0.75
C) 3.33 and 0.70
D) 2.50 and 0.40

Answer: C

If the marginal propensity to consume is 0.67 and initial spending increases by $25, real GDP will

If the marginal propensity to consume is 0.67 and initial spending increases by $25, real GDP will

A) increase by $75
B) decrease by $75
C) increase by $25
D) decrease by $25

Answer: C

If the marginal propensity to consume is 0.6 and real GDP falls by $25, this is caused by a decrease in initial spending of

If the marginal propensity to consume is 0.6 and real GDP falls by $25, this is caused by a decrease in initial spending of

A) $10.00
B) $15.00
C) $16.67
D) $20.00

Answer: A

If there was a change in investment spending of $10 and the marginal propensity to save was .25, then real GDP would increase by

If there was a change in investment spending of $10 and the marginal propensity to save was .25, then real GDP would increase by

A) $10
B) $20
C) $25
D) $40

Answer: D