(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table, assume full employment income is $1,000 while the current equilibrium is $750. If the government wants to eliminate the recessionary gap while maintaining a balanced budget, it must increase spending by
A) $100 and decrease taxes by $100.
B) $250 decrease taxes by $250.
C) $100 and increase taxes by $100.
D) $250 increase taxes by $250.

Question

(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table, assume full employment income is $1,000 while the current equilibrium is $750. If the government wants to eliminate the recessionary gap while maintaining a balanced budget, it must increase spending by 
A) $100 and decrease taxes by $100. 
B) $250 decrease taxes by $250. 
C) $100 and increase taxes by $100. 
D) $250 increase taxes by $250.

Quizplus · Accepted Answer

The Answer of (Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table, assume full employment income is $1,000 while the current equilibrium is $750. If the government wants to eliminate the recessionary gap while maintaining a balanced budget, it must increase spending by 
A) $100 and decrease taxes by $100. 
B) $250 decrease taxes by $250. 
C) $100 and increase taxes by $100. 
D) $250 increase taxes by $250.