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Two identical countries, Country A and Country B, can each be described by a Keynesian-cross model. The MPC is 0.9 in each country. Country A decides to increase spending by $2 billion, while Country B decides to cut taxes by $2 billion. In which country will the new equilibrium level of income be greater?
Relevant Costs
Costs that should be considered when making decisions because they will be affected by the decision.
Markup Percentage
The percentage difference between the cost of a good or service and its selling price, indicating the gross profit margin.
Opportunity Cost
The loss of potential gain from other alternatives when one alternative is chosen.
Contribution Margin
The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.
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