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In an Economy, the Government Wants to Decrease Aggregate Demand

Question 42

Multiple Choice

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could:


A) Increase taxes by $16 billion
B) Increase taxes by $24 billion
C) Decrease government spending by $10 billion
D) Decrease government spending by $16 billion

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