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In a private closed economy where MPC = 0.75, if consumers reduce their spending by $30 billion and firms cut investments by $10 billion, then

In a private closed economy where MPC = 0.75, if consumers reduce their spending by $30 billion and firms cut investments by $10 billion, then equilibrium GDP will decrease by

Multiple Choice

  • $160 billion.
  • $40 billion.
  • $120 billion.
  • $4 billion.

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