If a fall in investment demand of 100 units causes equilibrium income to fall by 150 units in the simple Keynesian model, then the marginal propensity to save must be

In 2008, the Fed created a new policy tool called

A) federal funds zero-rate, which required the Fed to lower the rate to near zero percent. B) open market operations, which required the Fed to buy securities from only the federal government. C) quantitative easing, which required the Fed to pay interest on required reserves. D) interest rate reductions, which allowed the Fed to lower interest rates paid to banks. E) quantitative easing, which allowed the Fed to buy private securities as well as government securities.

Suppose the economy has no income taxes or imports. The MPC equals 0.8. What does the expenditure model predict will be the change in real GDP if investment increases by $200 billion?

What will be an ideal response?