In a closed economy with no government, the initial equilibrium level of national income is $500 billion. Households in the economy always spend a fixed proportion of every $1 of income that they receive. If investment spending rises by $20 billion, the economy reaches a new equilibrium level of national income of $600 billion. What is the marginal propensity to consume of the economy’s households?
- A0.20
- B0.80
- C0.83
- D1.00