please answer this correctly, this is for my exam!

label Economics
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schedule 1 Day
account_balance_wallet $5

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.

Aug 19th, 2015

Thank you for the opportunity to help you with your question!

Answer D. Increase by $4 million. 

Explanation

The multiplier for 0.75 equals 4 and therefore multiplying it by $1 million you get $4 million

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Aug 19th, 2015

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