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In the Short-Run Keynesian Model Where the Marginal Propensity to Consume

Question 77

Multiple Choice

In the short-run Keynesian model where the marginal propensity to consume is 0.5, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, government purchases must be:


A) increased by $1 billion.
B) decreased by $1 billion.
C) decreased by $0.5 billion.
D) decreased by $2 billion.

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