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Suppose We Observe That an Increase in Government Spending of $10

Question 43

Multiple Choice

Suppose we observe that an increase in government spending of $10 billion raises the total aggregate demand by $40 billion.If there is no crowding-out effect, what would be the marginal propensity?


A) 0.25
B) 0.4
C) 0.75
D) 4

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