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Suppose That Government Purchases Increase by $200 and at the Same

Question 6

Multiple Choice

Suppose that government purchases increase by $200 and at the same time autonomous net taxes are increased by $200. If there are neither income taxes nor net exports, the change in equilibrium real GDP demanded will


A) depend on the value of the MPC
B) be a $200 decrease
C) be a $200 increase
D) be equal to zero, since higher taxes exactly offset higher government spending
E) be an increase by some amount greater than $200

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