Exhibit 11-7 Aggregate Demand and Supply Model Beginning at Equilibrium

Exhibit 11-7 Aggregate demand and supply model Beginning at equilibrium E₁ in Exhibit 11-7, suppose the marginal propensity to consume (MPC) is 0.75, and the government wishes to lower the price level form 170 to 150 while maintaining a balanced budget. The government should reduce both spending and taxes by:

A) $20 billion.
B) $100 billion.
C) $133 billion.
D) $400 billion.