Let the Marginal Propensity to Consume Equal 0

question 63

Multiple Choice

Let the marginal propensity to consume equal 0.9, the proportional income tax rate equal 0.2, the marginal propensity to import equal 0.12, the sensitivity coefficient of investment and the interest rate equal 0.03, and the exchange rate sensitivity to parity differential equal 0.1. In this case, the simple, pure government spending multiplier must equal

• A) 10.
• B) 3.8.
• C) 2.5.
• D) 2.2.
• E) none of the above.

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