Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.80, an increase in federal government spending of $100 billion at below full employment would be expected to shift the aggregate demand curve by $500 billion to the right.

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According to Keynesian economics, an increase in government spending would lead to a multiplier effect, meaning that the increase in income would lead to an increase in consumption, which in turn would lead to further rounds of increased income and consumption. The multiplier can be calculated using the formula 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, the multiplier would be 1/(1-0.80) = 5. Therefore, an increase in government spending of $100 billion would lead to an increase in aggregate demand of $100 billion x 5 = $500 billion.

Following Keynesian Economics, and Assuming a Marginal Propensity to Consume