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Suppose There Is a $20 Million Increase in Government Spending

Question 74

Multiple Choice

Suppose there is a $20 million increase in government spending. We know that this increase in government spending will cause which of the following to occur?


A) an increase in equilibrium real GDP and an increase in the multiplier.
B) an increase in equilibrium real GDP and a reduction in the multiplier.
C) an increase in equilibrium real GDP and no change in the multiplier.
D) equilibrium real GDP will increase by exactly $20 million.

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