Multiple Choice
Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. If the actual real GDP is $700 billion, _____ government spending by _____ would bring the economy to potential output.
A) increasing; $25 billion
B) increasing; $100 billion
C) increasing; $20 billion
D) decreasing; $100 billion
Correct Answer:
Verified
Correct Answer:
Verified
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