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Use the Aggregate Expenditures Model and Assume the Marginal Propensity

Question 181

Multiple Choice

Use the aggregate expenditures model and assume the marginal propensity to consume (MPC) is 0.90. A decrease in government spending of $1 billion would result in a decrease in GDP of:


A) $0.
B) $0.9 billion.
C) $1.0 billion.
D) $9.0 billion.
E) $10.0 billion.

Correct Answer:

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