Section: Principles of Macroeconomics

14) When aggregate supply is horizontal and the marginal propensity to consume is 0.50, a $10.00 increase in investment spending will result in

1. no change in the equilibrium level of output
2. a $10.00 increase in the equilibrium level of output
3. a $20.00 increase in the equilibrium level of output
4. a $50.00 increase in the equilibrium level of output