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Assume That the Marginal Propensity to Consume in an Economy

Question 3

Multiple Choice

Assume that the marginal propensity to consume in an economy is 0.9. If the economy's full-employment real GDP is $500 billion and its equilibrium real GDP is $550 billion, there is an inflationary expenditure gap of:


A) $5 billion
B) $50 billion
C) $100 billion
D) $500 billion

Correct Answer:

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