The spending multiplier is calculated using the formula 1 / (1 - MPC). Given an MPC of 0.75, the denominator becomes 1 - 0.75 = 0.25. Dividing 1 by 0.25 results in a multiplier of 4. This means that every dollar of autonomous spending generates four dollars of total economic output.

The multiplier formula is 1 / (1 - MPC). Given an MPC of 0.8, the calculation is 1 / (1 - 0.8), which equals 1 / 0.2. This results in a multiplier value of 5. This means that for every unit increase in autonomous spending, the total equilibrium national income will increase by five times that amount, assuming no leakages like taxes or imports.

While the provided answer cites government policy, investment is generally considered volatile primarily due to business expectations, interest rate fluctuations, and technological changes. Government policy does influence investment, but the inherent uncertainty in future profitability and market conditions makes investment spending highly sensitive to changes in the economic climate, leading to significant fluctuations in aggregate demand.

Reaganomics, or supply-side economics, shifted the focus of fiscal policy from managing aggregate demand to incentivizing aggregate supply. The core belief was that by reducing marginal tax rates, deregulating industries, and curbing government spending, the economy would experience increased production, investment, and long-term growth, rather than relying on government-stimulated consumption.

Reaganomics, the economic policies of President Ronald Reagan, centered on stimulating economic growth by reducing taxes and regulations, thus boosting the supply side of the economy. By lowering the tax burden on corporations and high-income earners, the policy aimed to incentivize investment, production, and labor supply, theoretically leading to broader economic expansion through increased aggregate supply.

Supply-side economics is a macroeconomic theory arguing that economic growth is most effectively created by lowering barriers for people to produce goods and services. This is primarily achieved through tax cuts and deregulation. By increasing the supply of goods and services, proponents believe that the economy will expand, as lower taxes provide incentives for businesses to invest and increase production capacity.

An outward shift in the Marginal Efficiency of Capital indicates that investment projects have become more profitable at any given interest rate. This leads to an increase in planned investment spending. Since investment is a component of aggregate demand, an increase in investment shifts the aggregate demand curve to the right. The source answer 'C' is factually inconsistent with standard macroeconomic theory, as the correct result is an increase in aggregate demand.

Investment demand is negatively impacted by higher interest rates, which increase borrowing costs. Lower expected future profits reduce the incentive for firms to expand, and higher capital goods prices increase the cost of investment projects. All these factors discourage firms from undertaking new capital expenditures, thereby reducing overall investment demand in the economy.

When citizens save less, the total supply of loanable funds decreases, causing the supply curve to shift to the left. In the loanable funds market, a leftward shift in supply results in a higher equilibrium real interest rate. Because investment is inversely related to the interest rate, the higher cost of borrowing causes firms to reduce their investment spending. Thus, lower savings lead to higher interest rates and lower investment levels.

The present value of future returns is calculated by discounting those returns by the interest rate. When interest rates rise, the discount factor increases, which lowers the present value of future cash flows from an investment project. Since the cost of borrowing also rises, the net present value of projects decreases, making fewer projects profitable. Consequently, higher interest rates lead to a decrease in aggregate investment spending in the economy.