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Exhibit 16A-5 Macro AD\AS Models as Shown in Exhibit

Question 10

Multiple Choice

Exhibit 16A-5 Macro AD\AS Models Exhibit 16A-5 Macro AD\AS Models As shown in Exhibit 16A-5, assume the marginal propensity to consume MPC equals 0.80. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E<sub>1</sub> to full employment. A) increased by $1.6 trillion B) decreased by $1.6 trillion C) increased by $.20 trillion D) increased by $.80 trillion As shown in Exhibit 16A-5, assume the marginal propensity to consume MPC equals 0.80. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E1 to full employment.


A) increased by $1.6 trillion
B) decreased by $1.6 trillion
C) increased by $.20 trillion
D) increased by $.80 trillion

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