Multiple Choice
Suppose aggregate output is demand determined.If the marginal propensity to spend is 0.5,and the MPC is 0.7,a $1 billion reduction in government purchases will cause equilibrium national income to ________ by ________.
A) decrease; $3.33 billion
B) decrease; $2.00 billion
C) decrease; $1.50 billion
D) increase; $2.00 billion
E) increase; $3.33 billion
Correct Answer:
Verified
Correct Answer:
Verified
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