Suppose That MPC = 0

question 29

Multiple Choice

Suppose that MPC = 0.7 and MPI = 0.2. According to the Keynesian multiplier, a decrease of $20 million in government purchases will

• A)increase real GDP by $40 million.
• B)decrease real GDP by $40 million.
• C)increase real GDP by $100 million.
• D)decrease real GDP by $100 million.
• E)have no impact on real GDP.