To determine how much the aggregate demand curve will shift as a result of an increase in investment, you can use the formula related to the multiplier effect. The multiplier (k) can be calculated using the marginal propensity to consume (MPC) as follows:
\[ k = \frac{1}{1 - MPC} \]
In this case, the MPC is 0.8:
\[ k = \frac{1}{1 - 0.8} = \frac{1}{0.2} = 5 \]
Now, if investment increases by $10 billion, the total increase in aggregate demand can be calculated by multiplying the increase in investment by the multiplier:
\[ \text{Total increase in aggregate demand} = \text{Initial increase} \times k \] \[ \text{Total increase in aggregate demand} = 10 \text{ billion} \times 5 = 50 \text{ billion} \]
Thus, the aggregate demand curve will shift rightward by $50 billion at each price level.
So the correct answer is:
rightward by $50 billion at each price level.