Question: Suppose aggregate output is demand determined. If the marginal propensity to spend is 0.5 and the marginal propensity to consume is 0.7, a $1 billion

Suppose aggregate output is demand determined. If the marginal propensity to spend is 0.5 and the marginal propensity to consume is 0.7, a $1 billion reduction in government purchases will cause equilibrium national income to ______ by _______

a) decrease; 2 billion $

b) decrease; 3.33 billion $

c) decrease; 1.5$ billion

d) increase; 3.33$ billion

e) increase; 2billion $

The answer is A but I am not sure how to determine it. Do you mind explaining?

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