If Net Exports Fall $20 Billion and the MPC Is

question 211

Multiple Choice

If net exports fall $20 billion and the MPC is 7/10 and there is a multiplier effect,but no crowding out and no investment accelerator,then

• A) aggregate demand falls by 10/3 x $20 billion.
• B) aggregate demand falls by 7/3 x $20 billion.
• C) aggregate demand falls by 7/10 x $20 billion.
• D) None of the above is correct.

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