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If the Consumption Function Is Defined as C = 800

Question 3

Multiple Choice

If the consumption function is defined as C = 800 + (0.75) YD, the marginal income tax rate is t = 0.5, and autonomous investment decreases by 50, then the budget surplus will


A) remain unaffected
B) decrease by 100
C) decrease by 80
D) decrease by 40
E) decrease by 10

Correct Answer:

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