Suppose that investment demand increases by $900 billion in a closed and private economy (no government or foreign trade). Assume further that households have a marginal propensity to consume of 70 percent.

(a) Compute four rounds of multiplier effects. Instructions:

Enter your responses to the nearest one decimal place. Changes in ThisCycle's Spending(in billions) CumulativeChangein Spending(in billions)
First cycle 900900
Second cycle 630 1530
Third cycle 441 1971
Fourth cycle 308.7 2279.7

(b) What will be the final cumulative impact on spending?

Instructions:Enter your responses to the nearest one decimal place.