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If the Absolute Value of the Tax Multiplier Equals 1

Question 299

Multiple Choice

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.


A) $250 billion
B) $400 billion
C) $640 billion
D) None of the above are correct.Taxes should be increased in this case.

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