Question

In the Keynesian-cross model for closed economy, if the MPC equals 0.8, then $5 million rise in government spending increases private consumption by ______ and increases the equilibrium level of income by ______.

A) $0 million; $5 million
B) $3 million; $5 million
C) $5 million; $20 million
D) $20 million; $25 million
Please give me the detailed calculation process, thank you, otherwise I only know the answer but do not know the reason, thank you very much.

Answer 1

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