Consider an Economic Model with No Income Taxes and No

question 37

Multiple Choice

Consider an economic model with no income taxes and no international trade.Suppose the marginal propensity to consume in Canada is 3/5, and the marginal propensity to save in India is 1/10.Which of the following characterizes how the Indian and Canadian economies would be affected?  

• A) Increases in government purchases would increase real GDP demanded more per dollar in India than in Canada. 
• B) Decreases in government purchases would increase real GDP demanded more per dollar in India than in Canada. 
• C) Increases in autonomous saving would increase real GDP demanded more per dollar in India than in Canada. 
• D) Real GDP demanded would be higher in India than in Canada.

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