Exhibit 11-5 Aggregate demand and supply model 
Suppose the economy in Exhibit 11-5 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E2 and reduce inflation by:
A) increasing government spending by $50 billion.
B) decreasing government spending by $6 billion.
C) decreasing government spending by $100 billion.
D) decreasing government spending by $50 billion.
Correct Answer:
Verified
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