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Marginal propensity to consume

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Reference no: EM131116712

Assume the government increases its purchases of goods and services by $50 million, with a marginal propensity to consume of 0.90. The country has a preogressive income tax system and imports goods and services. Therefore, which of the following would most likely be correct?

  1. GDP increases by $50 million

  2. GDP increases by less than $50 million

  3. GDP increases by $500 million

  4. GDP decreases by $500 million

  5. GDP increases by less than $500 million

Reference no: EM131116712

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