Assume That the MPC Is 0

Multiple Choice

Assume that the MPC is 0.8, full employment is considered to be at a GDP level of $500 billion, and 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) decrease; $100 billion; $100 billion
B) increase; $20 billion; $100 billion
C) increase; $25 billion; $100 billion
D) increase; $100 billion; $100 billion