4. D.
(MPC = 0.75
according to spending multiplier,
Change in income = Change in spending/(1-MPC) = 800/(1-.75) = 800/.25 = 3200)
5. D
(MPC = 0.75 and change in income required = 4400-4800 = -400
according to spending multiplier,
Change in spending = Change in income*(1-MPC) = (-400)*(1-.75) = (-400)*.25 = -100
So, government spending should be decreased by 100.)
6. B
(As Y > AE so unplanned inventory will be positive and income would fall.)
the consumption function for an economy is C# 180 + 75 Yd (disposable Income) and spending...
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