In Country X, the Government Simultaneously Increases Its Expenditures by $100

question 218

Multiple Choice

In Country X, the government simultaneously increases its expenditures by $100 billion and increases taxes by $100 billion. If the MPS is equal to 0.4, the government's action ________ real GDP by ________.

• A) increases; $250 billion
• B) decreases; $250 billion
• C) increases; $100 billion
• D) has no effect on; $0

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