Q.

Suppose that the MPC out of disposable income was 0.8 and the tax function for a given economy was T= -30+0.25Y. an increase in the intercept of the tax function of 10 units(from -30 to -20 would cause equilibrium income in the simple Keynesian model to fall by

A. -20 units
B. 10 units
C. 20 units
D. 40 units
Answer» C. 20 units
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