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In a closed economy, there are two groups of households. The first group of households are those who work, earn income and pay income taxes. The second group of households are those who do not work, do not pay taxes and depend on transfer payments from the government to get by. Both groups also have different marginal propensity to consume (MP0). The consumption function of the rst group (working households) is given as CW, with autonomous consumption A1 and MPG, 61 (0

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