If MPC = 0

If MPC = 0.75, a $40 billion decrease in government purchases would have what size effect on the "first round" of changed consumption, and what effect on AD?

A) ​reduce "first round" consumption by $160 billion; reduce AD by $640 billion
B) ​reduce consumption by $120 billion; reduce AD by $480 billion
C) ​reduce consumption by $40 billion; reduce AD by $160 billion
D) ​reduce consumption by $30 billion; reduce AD by $160 billion

Correct Answer:

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