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Suppose That the Economy's Marginal Propensity to Consume Is 0

Question 32

Multiple Choice

Suppose that the economy's marginal propensity to consume is 0.75. Assuming that prices are constant, a $175 million decrease in government purchases of goods and services would decrease equilibrium real GDP by


A) $500 million
B) $600 million
C) $700 million
D) $800 million

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