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Suppose a $100 Autonomous Net Tax Is Introduced in an Economy

Question 23

Multiple Choice

Suppose a $100 autonomous net tax is introduced in an economy with an MPC equal to 0.8.How will this affect equilibrium real GDP demanded at each level of real GDP?  


A)  The equilibrium real GDP demanded will increase by $100. 
B)  The equilibrium real GDP demanded will increase by more than $100. 
C)  The equilibrium real GDP demanded will decrease by less than $100. 
D)  The equilibrium real GDP demanded will decrease by more than $100.

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