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Suppose the Marginal Propensity to Consume Is 0

Question 14

Multiple Choice

Suppose the marginal propensity to consume is 0.75.If government purchases increase by $100 billion and the extra expenditure is financed with a net tax of $100 billion,by how much will output change?


A) -$400 billion
B) $100 billion
C) $400 billion
D) $0
E) -$100 billion

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