Exhibit 15-3 Aggregate demand and supply model 
Suppose the economy in Exhibit 15-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by:
A) $0.20 trillion.
B) $1 trillion.
C) $0.5 trillion.
D) $0.25 trillion.
Correct Answer:
Verified
Q30: The spending multiplier is defined as:
A) the
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Q72: Exhibit 15-2 Aggregate demand and supply model
Q73: Exhibit 15-3 Aggregate demand and supply model
Q74: The equation for the spending multiplier is:
A)
Q76: If the MPC = .75, the spending
Q78: The spending multiplier is:
A) 1 / (1
Q79: If the MPC = 1, the spending
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