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When we increased planned investment spending by $500 in an economy where mpc equaled 0.80, the total increase in Y was $2500. When taxes are reduced by $500, we are missing the first round of spending compared to the planned investment spending increase. What is the total change in output (Y) when there is a $500 tax break and mpc is 0.8?
A. 500
B. 2000
C. 2500
D. 3000

Sagot :

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