Suppose the MPC = 0.90 instead of 0.80. Investment spending rises by 1000.

Fill out the following table:

Change in Spending Change in Income

Round 1 1000 1000

Round 2

Round 3

Round 4

Hint: What is the relationship between my spending and your income? The first line of the table is completed for you.

1. How much is spent out of each new dollar?

2. What is the multiplier now?

3. Is this new multiplier the same as the one we solved for when the MPC = 0.80? Why is it or why is it not the same? What is the intuition?