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The Income-Expenditure Model Predicts That If the Marginal Propensity to Consume

Question 271

Multiple Choice

The income-expenditure model predicts that if the marginal propensity to consume is 0.8 and the federal government decreases spending by $200 billion, real GDP will fall by:


A) $160 billion.
B) $200 billion.
C) $800 billion.
D) $1,000 billion.

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