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If MPC = 0

Question 72

Multiple Choice

If MPC = 0.75, a $40 billion decrease in government purchases would have what size effect on the "first round" of induced added consumption?


A) ​It would increase first round consumption by $30 billion.
B) ​It would increase first round consumption by $40 billion.
C) ​It would increase first round consumption by $120 billion.
D) ​None of the above; the first round effect would be a decrease in consumption.

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