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Assume That an Economy's Real GDP Multiplier Is 4

Question 102

Multiple Choice

Assume that an economy's real GDP multiplier is 4. If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full employment equilibrium of $1,500 billion?


A) $500 billion spending cut.
B) $500 billion spending increase.
C) $125 billion spending cut.
D) $125 billion spending increase.

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