Multiple Choice
Assume that the marginal propensity to consume is 0.8. Government purchases of goods and services increase by $100 billion, financed by a $100 billion tax increase. Real GDP will:
A) expand by $100 billion.
B) contract by $100 billion.
C) expand by $500 billion.
D) expand by $400 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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