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Consider an Economy Whose Households Save 20% of Increases in Their

Question 185

Multiple Choice

Consider an economy whose households save 20% of increases in their income. If the government lowers its transfers by $100 billion, then the real GDP will:


A) decrease by $125 billion.
B) decrease by $400 billion.
C) increase by $125 billion.
D) decrease by $500 billion.

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