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In the Keynesian-Cross Model, If the MPC Equals 0

Question 23

Multiple Choice

In the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by _____ and increases the equilibrium level of income by _____.


A) $3 billion; $9 billion
B) $2.25 billion; $6.75 billion
C) $2.25 billion; $2.25 billion
D) $3 billion; $3 billion

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