AP Macroeconomics Question 437: Answer and Explanation
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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
C-With an MPC = .90, M = 10, so increased investment shifts AD $1,000 to the right.