Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD0 to AD1 was caused by a decrease in investment of $50 billion. What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?
A. It will fall by exactly $200 billion.
B. It will fall by more than $200 billion.
C. It will fall by less than $200 billion.
D. It will fall by less than $67 billion.
Answer: C
Economics
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