Suppose the Economy Is Operating at Its Full-Employment, Noninflationary GDP

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.