Multiple Choice
Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly) , government should
A) increase government expenditures by $80 billion.
B) reduce government expenditures by $40 billion.
C) reduce taxes by $40 billion.
D) reduce taxes by $80 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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