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Surge in Government Demand (G) Discourages Some Private Demand (I)

Question 9

Multiple Choice

Surge in government demand (G) discourages some private demand (I) and this is a major reason as to why the oversimplified formula: 1/(1-MPC) ____________ the size of the multiplier.


A) exaggerates
B) underestimates
C) has no impact on
D) none of these

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