The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

question 1

Multiple Choice

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc) = 0.75
∙ net tax rate (t) = 0.20
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars. FIGURE 22-2
-Refer to Figure 22-2.What is the value of the multiplier in this economy?

• A)1.33
• B)1.67
• C)2.0
• D)2.5
• E)6.67

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