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An open economy has c = 0.9 and m = 0.1. Its autonomous spending multiplier equals
A10
B1.25
C5
D0.2
Answer & Solution
Correct answer: C. 5
Using 1/(1 - c + m) gives 1/(1 - 0.9 + 0.1) = 1/0.2 = 5.
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