If a $10 Billion Decrease in Lump-Sum Taxes Increases Equilibrium

question 5

Multiple Choice

If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion, then

• A)the multiplier is 4.
• B)the MPC for this economy is 0.8.
• C)the MPC for this economy is 0.6.
• D)the multiplier is 3.

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