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If the Marginal Propensity to Expend Is Equal to

Question 38

Multiple Choice

If the marginal propensity to expend is equal to .6, the interest rate sensitivity of investment is equal to $100 billion, the interest rate sensitivity of the exchange rate is 10, and the exchange rate sensitivity of exports is $7 billion, a one percentage point change in the real interest rate will change the level of aggregate demand by


A) $170 billion.
B) $425 billion.
C) -$425 billion.
D) -$170 billion.

Correct Answer:

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