In a Certain Year, the Aggregate Amount Demanded at the Existing

Multiple Choice

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government
Purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions,
The government should

A) increase tax rates and/or reduce government spending.
B) discourage personal saving by reducing the interest rate on government bonds.
C) increase government expenditures.
D) encourage private investment by reducing corporate income taxes.