In the Basic Keynesian Model Where the Marginal Propensity to Consume

question 20

Multiple Choice

In the basic Keynesian model where the marginal propensity to consume is 0.5,government purchases must be _________,to close an expansionary gap resulting from a $1 billion increase in autonomous consumption.

• A) increased by $1 billion
• B) decreased by $1 billion
• C) increased by $2 billion
• D) decreased by $2 billion
• E) increased by $0.5 billion

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