Suppose That the Government Increases Spending by $100 Billion as a Stimulus

question 70

Multiple Choice

Suppose that the government increases spending by $100 billion as a stimulus package. If the marginal propensity to consume is 0.6, then real GDP will:

• A) decrease by $250 billion.
• B) increase by $250 billion.
• C) increase by $600 billion.
• D) decrease by $400 billion.

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