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 tax revenue by $6 billion.
B) decreasing government tax revenue by $6.1 billion.
C) decreasing government tax revenue by $200 billion.
D) increasing government tax revenue by approximately $66 billion.
E) decreasing government tax revenue by approximately $66 billion.
Correct Answer:
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