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Suppose the Multiplier Is 4 and Lump-Sum Taxes Are Increased

Question 21

Multiple Choice

Suppose the multiplier is 4 and lump-sum taxes are increased by $16 in a closed economy.We can predict that:

A) GDP will increase by $64.
B) GDP will decrease by $64.
C) the aggregate expenditures schedule will shift downward by $12.
D) inflation will occur.

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