Autonomous aggregate expenditures increases by $100 million, the margi

Autonomous aggregate expenditures increases by $100 million, the marginal propensity to consume is 0.60, marginal propensity to invest is 0.20, and the marginal propensity to import is 0.10. Calculate the change in income.

What will be an ideal response?

ANSWER

Δ Autonomous Expenditures × 1/[1-(marginal propensity to consume + marginal propensity to invest – marginal propensity to import)] = Δ Income

$100 × 1/1-(0.60 + 0.20 – 0.10 ) = $100 × 3.33 = $333