Assume That Marginal Propensity to Consume Is 0

question 210

Multiple Choice

Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. If the actual real GDP is $700 billion, _____ government spending by _____ would bring the economy to potential output.

• A)increasing; $25 billion
• B)increasing; $100 billion
• C)increasing; $20 billion
• D)decreasing; $100 billion

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