Multiple Choice
If the marginal propensity to consume (MPC) is 4/5, a decrease in government purchases by $10 billion, other things constant, will ultimately lead to a:
A) $30 billion increase in aggregate demand in an economy.
B) $10 billion increase in aggregate demand in an economy
C) $10 billion decrease in aggregate demand in an economy.
D) $50 billion decrease in aggregate demand in an economy.
E) $8 billion decrease in aggregate demand in an economy.
Correct Answer:
Verified
Correct Answer:
Verified
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