Multiple Choice
A government announces that it will increase government purchases by $20 billion. If the MPC = .8, what impact will this have on the equilibrium level of real GDP after the full potential expenditure multiplier effect is felt?
A) It will decrease by $80 billion.
B) It will increase by $100 billion.
C) It will increase by $25 billion.
D) It will decrease by $25 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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