Assume That the MPC Is 0

Multiple Choice

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.

A) increases by $1,000; decreases by $1,000
B) increases by $900; decreases by $1,000
C) increases by $1,000; decreases by $900
D) increases by $400; decreases by $400