Suppose That Government Purchases Increase by $200 and at the Same

question 6

Multiple Choice

Suppose that government purchases increase by $200 and at the same time autonomous net taxes are increased by $200. If there are neither income taxes nor net exports, the change in equilibrium real GDP demanded will

• A)depend on the value of the MPC
• B)be a $200 decrease
• C)be a $200 increase
• D)be equal to zero, since higher taxes exactly offset higher government spending
• E)be an increase by some amount greater than $200

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