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Use the Aggregate Expenditures Model and Assume the Marginal Propensity

Question 11

Multiple Choice

Use the aggregate expenditures model and assume the marginal propensity to consume (MPC) is 0.80. An increase in government spending of $1 billion would result in an increase in GDP of:


A) $0.8 billion.
B) $1.0 billion.
C) $5.0 billion.
D) $8.0 billion.

Correct Answer:

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