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if the mpc is 0.50 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $145 billion will eventually shift the aggregate demand curve to the right by a. $290 billion. b. $216 billion. c. $480 billion. d. $150 billion.

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abiolataiwo2015

If the mpc is 0.50 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $145 billion will eventually shift the aggregate demand curve to the right by a. $290 billion.

How to find the overall change in the aggregate demand?

Given data:

Marginal propensity to consume, MPC = 0.50

Initial increase in an aggregate demand = $145billion

First step is to find the spending multiplier using this formula

Spending multiplier= 1 ÷ (1 - MPC)

Spending multiplier= 1 ÷ (1 - 0.50)

Spending multiplier= 1 ÷ 0.50

Spending multiplier= 2

Now let find the  overall change in the aggregate demand  using this formula

Overall change in the aggregate demand = Initial increase in the aggregate demand × Spending multiplier

Overall change in the aggregate demand = $145 billion × 2

Overall change in the aggregate demand = $290 billion

Therefore the correct option is A.

Learn more about overall change in the aggregate demand here:https://brainly.com/question/28189323

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