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Reference no: EM131088323

In the simple Keynesian model with no government and foreign sectors, suppose that initially the economy is in equilibrium at an output of $10 trillion with a marginal propensity to consume of 0.8. If investment spending increases by $0.5 trillion, what is the new equilibrium output level?

  • $10.5 trillion
  • $12.5 trillion
  • $12.0 trillion
  • $10.8 trillion

Reference no: EM131088323

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