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If Short-Run Equilibrium Output Equals 10,000, the Income-Expenditure Multiplier Equals

Question 109

Multiple Choice

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, and potential output (Y*) equals 9,000, then government purchases must ________ to eliminate any output gap.


A) increase by 100
B) decrease by 100
C) increase by 1,000
D) decrease by 1,000

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