APFIVE Spending Multiplier with Proportional Taxes
An economy has an MPC of 0.75 and a tax rate of 20%. If investment spending decreases by $60 billion, what will be the approximate impact on equilibrium real GDP?
A
Decrease by $240 billion
B
Decrease by $150 billion
C
Decrease by $60 billion
D
Decrease by $180 billion
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