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Suppose That in an Economy with an MPC of

Question 217

Multiple Choice

Suppose that in an economy with an MPC of .8 the government wanted to shift the aggregate demand curve leftward by $40 billion at each price level to remedy demand-pull inflation.It could:


A) increase taxes by $10 billion.
B) reduce government spending by $40 billion.
C) reduce government spending by $5 billion.
D) increase taxes by $20 billion.

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