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Assume That Taxes Depend on Income and the MPC Is

Question 265

Multiple Choice

Assume that taxes depend on income and the MPC is 0.8 and t is 0.4. An increase in taxes of $10 billion will decrease equilibrium income by

A) $15.4 billion.
B) $19.2 billion.
C) $25 billion.
D) $27 billion.

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