Consider a Model in Which Output Is Demand- Determined

question 28

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

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