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Describe no calculation yet would total output increase or

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Suppose, ceteris paribus, government purchases decreased by $4 billion, investment spending increased by $40 billion.

A. EXPLAIN (no calculation yet). Would total output increase or decrease? What is the multiplier effect and how does it influence the answer to the question.

B. SOLVE. If 70% of a change in income is spent on new goods and services, what is the anticipated change in total output? Use the formula for the multiplier effect to calculate the change in total output.

Reference no: EM13389688

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