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Suppose That the Economy Is Experiencing an Expansionary Gap of $1,000

Question 116

Multiple Choice

Suppose that the economy is experiencing an expansionary gap of $1,000 and the MPC equals 0.8.With an upward-sloping short-run aggregate supply curve,the government can close the gap if it decreases purchases by


A) $1,000
B) $800
C) $200
D) more than $200
E) less than $200

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