Multiple Choice
Suppose that the government allocates $1 billion for new roads.It also raises taxes by $1 billion to keep the deficit from growing.If the marginal propensity to consume = 0.9,what is the effect on equilibrium GDP?
A) GDP does not change.
B) GDP increases by $10 billion.
C) GDP increases by $900 000.
D) GDP increases by $1 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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