Suppose lower interest rates suddenly lead to an injection of $325 additional investment spending into the economy and the marginal propensity to consume is 0.80.Table 10.1Spending CyclesChange in this Cycle's Spending and IncomeCumulative Increase in Spending and IncomeFirst-cycle spending$325$325Second-cycle spending________________Third-cycle spending________________In Table 10.1, what will be the total increase in aggregate demand resulting from the initial $325 increase in investment expenditure after an infinite number of cycles?
A. $3,965.
B. $1,625.
C. $325.
D. $1,040.
Answer: B
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