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Using the Keynesian Cross Model and assuming a marginal propensity to consume of 0.8, demonstrate and explain the impact on GDP of an expenditure reduction
Using the Keynesian Cross Model and assuming a marginal propensity to consume of 0.8, demonstrate and explain the impact on GDP of an expenditure reduction of $500 billion. Ensure your analysis includes the numerical answer, a graphic illustration, and an explanation of the numerical answer.
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