Multiple Choice
Suppose that marginal propensity to consume is equal to 0.9 and the government increases its spending by $200 billion. This increase in spending is financed by a $200 billion increase in taxes. As a result of this, GDP will:
A) not change at all.
B) decrease by $200 billion.
C) increase by $2,000 billion.
D) increase by $200 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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