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A $100 Billion Decrease in Government Purchases in an Economy

Question 60

Multiple Choice

A $100 billion decrease in government purchases in an economy, other things constant, would:


A) increase aggregate demand by approximately $500 billion if the marginal propensity to consume were 0.8
B) decrease aggregate demand by approximately $300 billion if the marginal propensity to consume were 2/3
C) increase aggregate demand by $ approximately 200 billion if the marginal propensity to consume were 0.5.
D) decrease aggregate demand by approximately $40 billion if the marginal propensity to consume were 0.4
E) increase aggregate demand by approximately $400 billion if the marginal propensity to consume were 0.4.

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