Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals
A. 4.
B. 5.
C. 2.
D. 10.
Answer: A
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