Assume that the marginal propensity to consume = .75. An equal decrease in both autonomous taxes and government spending of $ 1 million each, will cause GDP to
a. increase by $ 3 million
b. remain unchanged
c. fall by $ 4 million.
d.increase by $ 4 million
e. increase by $ 2 million.
f. fall by $ 1 million.
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Answer D. Increase by $4 million.
The multiplier for 0.75 equals 4 and therefore multiplying it by $1 million you get $4 million
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