In the nation of Economia, the economy is overheating and there is danger of inflation. The chief economist estimates that current income is $50 billion, the optimal level is $40 billion, and the multiplier is 4. If government wants to close the inflationary gap, it should reduce government spending by
A) $2.5 billion.
B) $7.5 billion.
C) $10 billion.
D) $40 billion.
Correct Answer:
Verified
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