If the Marginal Propensity to Save Is 0

question 306

Multiple Choice

If the marginal propensity to save is 0.25, investment spending is $700 million, and the government increases its purchases of goods and services by $100 million, then real GDP increases by:

• A)$25 million.
• B)$175 million.
• C)$400 million.
• D)$2,800 million.

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