which-of-the-following-best-illustrates-the-repeated-rounds-of-spending-and-earn

Question

Which of the following best illustrates the repeated rounds of spending and earning triggered by a $1 billion government expenditure with an MPC of 0.8?

Accepted Answer

Initial $1 billion -> $0.8 billion -> $0.64 billion -> $0.512 billion, and so on.

Answer

Initial $1 billion -> $0.2 billion -> $0.04 billion -> $0.008 billion, and so on.

Answer

Initial $1 billion -> $1.2 billion -> $1.44 billion -> $1.728 billion, and so on.

Answer

Initial $1 billion -> $0.5 billion -> $0.25 billion -> $0.125 billion, and so on.

Which of the following best illustrates the repeated rounds of spending and earning triggered by a \$1 billion government expenditure with an MPC of 0.8?