AP Macroeconomics Question 437: Answer and Explanation

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Question: 437

12. If $100 of new autonomous private investment were added to an economy with a marginal propensity to consume of .90, by how much would aggregate demand shift to the right?

  • A. $190
  • B. $900
  • C. $1,000
  • D. $1,900
  • E. $90

Correct Answer: C

Explanation:

C-With an MPC = .90, M = 10, so increased investment shifts AD $1,000 to the right.