Question

In a certain economy, when income is $1000, consumer spending is $800. the value of the multiplier for this economy is 2.5. it follows that, when income is $1020, consumer spending is

Answer 1

It follows that, when income is $1020, consumer spending is $812. For this economy, an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand.

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