Exhibit 20A-3 Macro AD/AS Model

-As shown in Exhibit 20A-3,assume the marginal propensity to consume MPC equals 0.80.Using discretionary fiscal policy,federal government spending should be ____ in order to restore the economy from E₁ to full employment.
A) increased by $2 trillion
B) decreased by $2 trillion
C) decreased by $.40 trillion
D) increased by $.40 trillion
E) increased by $.80 trillion

Question

Exhibit 20A-3 Macro AD/AS Model
 
-As shown in Exhibit 20A-3,assume the marginal propensity to consume MPC equals 0.80.Using discretionary fiscal policy,federal government spending should be ____ in order to restore the economy from E₁ to full employment.
A) increased by $2 trillion 
B) decreased by $2 trillion 
C) decreased by $.40 trillion 
D) increased by $.40 trillion 
E) increased by $.80 trillion

Quizplus · Accepted Answer

The Answer of Exhibit 20A-3 Macro AD/AS Model
 
-As shown in Exhibit 20A-3,assume the marginal propensity to consume MPC equals 0.80.Using discretionary fiscal policy,federal government spending should be ____ in order to restore the economy from E₁ to full employment.
A) increased by $2 trillion 
B) decreased by $2 trillion 
C) decreased by $.40 trillion 
D) increased by $.40 trillion 
E) increased by $.80 trillion