In the Short-Run Keynesian Model Where the Marginal Propensity to Consume

question 21

Multiple Choice

In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, transfers must be:

• A)increased by $1 billion.
• B)decreased by $1 billion.
• C)increased by $1.33 billion.
• D)decreased by $1.33 billion.