Suppose Aggregate Output Is Demand Determined

question 68

Multiple Choice

Suppose aggregate output is demand determined.If the marginal propensity to spend is 0.5,and the MPC is 0.7,a $1 billion reduction in government purchases will cause equilibrium national income to ________ by ________.

• A)decrease; $3.33 billion
• B)decrease; $2.00 billion
• C)decrease; $1.50 billion
• D)increase; $2.00 billion
• E)increase; $3.33 billion

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