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C = 0.7 Y
I = 500
G = 300
Consider the income-expenditure identity in a closed economy, Y = C + I + G. Suppose consumption is always a fraction (mpc) of income such that C = mpc * Y.
What is the ratio 1/(1-mpc?
a) the income multiplier
b) the spending multiplier
c) the marginal propensity to save
d) the marginal propensity to consume
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