Assume that the MPC is 0.8.Full employment is considered to be at a GDP level of $500 billion.The current GDP is $400 billion.The government is committed to a balanced budget.To achieve full employment,the government should _______ taxes by ____________ and increase government spending by ________.
A) increase;$100 billion;$100 billion
B) increase;$20 billion;$100 billion
C) increase;$25 billion;$100 billion
D) reduce;$100 billion;$100 billion

Question

Quizplus · Accepted Answer

The government should increase taxes by $20 billion and increase government spending by $100 billion to achieve full employment.

Assume That the MPC Is 0