Multiple Choice
Suppose the economy is operating at its full-employment, noninflationary GDP and the MPC is 0.75.The federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation.To sustain full-employment, noninflationary GDP, government must
A) reduce taxes by $28 billion.
B) reduce transfer payments by $21 billion.
C) increase taxes by $21 billion.
D) increase taxes by $28 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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