If Government Purchases Are Increased by $100, Taxes Are Reduced

question 21

Multiple Choice

If government purchases are increased by $100, taxes are reduced by $100, and the MPC is 0.8, equilibrium output will change by

• A) -$400.
• B) $900.
• C) $1,800.
• D) an amount that cannot be determined from this information.

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Definitions:

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