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Suppose the Government Spending Multiplier Is 3

Question 89

Multiple Choice

Suppose the government spending multiplier is 3.2.Assuming prices are constant,this means that


A) a $1 decline in government spending will raise Real GDP by $3.20.
B) a $1 rise in government spending will raise both total spending and Real GDP (assuming prices are constant) by $3.20.
C) a $1 rise in government spending will raise investment spending by $3.20.
D) a $1 rise in government spending will change interest rates by 3.20 percent compared to what they were before the $1 rise in government spending.
E) none of the above

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