How large is the increase in aggregate demand

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With the economy in a recession because of inadequate aggregate demand, the government increases its purchases by $1,200. Suppose the central bank adjusts the money supply to hold the interest rate constant, investment spending is fixed, and the marginal propensity to consume is 2/3.

How large is the increase in aggregate demand?

$400

$800

$1,800

$3,600

Reference no: EM13773932

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