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Consider the Simplest Macro Model with a Constant Price Level

Question 12

Multiple Choice

Consider the simplest macro model with a constant price level and demand-determined output.If the business community decreases its planned investment expenditures by $4 billion,causing equilibrium national income to fall by $12 billion,the marginal propensity to spend must be


A) 1/3.
B) 1/2.
C) 2/3.
D) 4/5.
E) 3.

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