In an economy, the marginal propensity to consume of the unemployed is higher than that of taxpayers.
The government increases both expenditure on unemployment benefits and taxation by $10 million.
What will be the impact on aggregate demand?
1 )
It will be unchanged.
It will increase by less than $10 million.
3 )
It will increase by $10 million.
4 )
It will decrease by $10 million.
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