Suppose equilibrium real GDP is currently at $800 billion and investment is $100 billion. If an increase in the interest rate reduces investment from $100 billion to $75 billion, and the MPC is 0.8, the new level of equilibrium real GDP will be:
a. $500 billion.
b. $600 billion.
c. $675 billion.
d. $775 billion.
e. $800 billion.
c
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