Problem
Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur?
a. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3.
b. Firms reduce investment spending by $40 billion; the marginal propensity to consume is 0.8.
c. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.