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Suppose the GDP Is in Equilibrium at Full Employment and the MPC

Question 77

Multiple Choice

Suppose the GDP is in equilibrium at full employment and the MPC is .80. If government wants to increase its purchase of goods and services by $16 billion without changing equilibrium GDP, taxes should be:


A) Increased by $20 billion
B) Reduced by $16 billion
C) Increased by $16 billion
D) Reduced by $20 billion

Correct Answer:

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