(Answered) Assume the government increases its purchases of goods and

Management Studies

Assume the government increases its purchases of goods and services by $50 million, with a marginal propensity to consume of 0.90. The country has a preogressive income tax system and imports goods and services. Therefore, which of the following would most likely be correct?

GDP increases by $50 million
GDP increases by less than $50 million
GDP increases by $500 million
GDP decreases by $500 million
GDP increases by less than $500 million

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