Exhibit 11-3 Aggregate demand and supply model 
Suppose the economy in Exhibit 11-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by:
A) $0.20 trillion.
B) $250 billion.
C) $0.50 trillion.
D) $1 trillion.
Correct Answer:
Verified
Q31: The nation has its own MPC. When
Q45: The sum of the marginal propensity to
Q58: The ratio of a change in consumption
Q59: The change in consumption divided by a
Q66: The marginal propensity to save (MPS)is computed
Q70: The marginal propensity to save is
A)the change
Q73: Exhibit 11-1 Disposable income and consumption data
Q74: Exhibit 11-2 Aggregate demand and supply model
Q102: If the marginal propensity to consume =
Q111: The marginal propensity to save is:
A)the change
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