step by step explanantionsplease, as i did not understand the answer in the first pleace!

C112. Quantifying the accelerator effect: suppose that the capital intensity of production {a} is 0.3, the mark-up is 20 percent, the depreciation rate is 6 percent and the real interest rate is 4 percent, and the desired capital/output ratio is 2.5. Now suppose there is a permanent increase in expected demand of 4%; calculate the increase in the desired capital stock as a percent of output {round your answer to the nearest 1%}. A) 0% B} 2% c} 4% 0} 6% E) 3% F} 10% G} 12% H} 14% I) 16% J} 18% K} 20% L} 22% M} 24% N} 26% o) 28% P} 30% Answer: F Source: This question comes from the chapter 3 (week 4] tutorial sheet. Explanation: Most ofthe numbers in this question are superfluous [you need them to calculate the desired capital/output ratio, but that is already given as 2.5). When demand [and output] goes up by 4%, the long run capital stock must also rise by 4%. Since the capital/output ratio is 2.5, this means that the 4% increase in the capital stock is equivalent to 10% of GDP