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Assume That the Savings Function Is of the Form S

Question 12

Multiple Choice

Assume that the savings function is of the form S = - 100 + (0.2) YD and the marginal income tax rate is t = 0.25.What would be the effect on the equilibrium level of output if autonomous consumption changes by change Co = - 50?


A) a decrease in output of 400
B) a decrease in output of 250
C) a decrease in output of 200
D) a decrease in output of 125
E) a decrease in output of 100

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