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Advanced Placement (AP), 24.10.2020 21:40 paper

If real GDP is $500 billion, full employment GDP is $200 billion, and the marginal propensity to consume is 0.75, then Congress should: a. increase government spending by $100 billion.

b. decrease taxes by $100 billion.

c. increase government spending by $75 billion.

d. increases taxes by $100 billion.

e. increase government spending by $300 billion.

Please explain why! Not sure how to do this type of problem. Thanks!

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