Multiple Choice
Suppose that MPC = 0.7 and MPI = 0.2. According to the Keynesian multiplier, a decrease of $20 million in government purchases will
A) increase real GDP by $40 million.
B) decrease real GDP by $40 million.
C) increase real GDP by $100 million.
D) decrease real GDP by $100 million.
E) have no impact on real GDP.
Correct Answer:
Verified
Correct Answer:
Verified
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