Consider a Model in Which Output Is Demand-Determined

question 116

Multiple Choice

Consider a model in which output is demand-determined. If the marginal propensity to spend out of national income is 0.4, then a $0.6 billion decrease in government purchases will cause equilibrium national income to
By approximately .

• A) decrease; $1.50 billion
• B) decrease; $1.00 billion
• C) decrease; $0.24 billion
• D) increase; $1.00 billion
• E) increase; $1.50 billion

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