Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.
A. increases by $1,000; decreases by $900
B. increases by $1,000; decreases by $1,000
C. increases by $400; decreases by $400
D. increases by $900; decreases by $1,000
Answer: A
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