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

Multiple Choice

Exhibit 16A-5 Macro AD\AS Models As shown in Exhibit 16A-5, assume the marginal propensity to consume MPC equals 0.75. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E₁ to full employment.

A) increased by $.25 trillion
B) decreased by $.25 trillion
C) decreased by $2 trillion
D) increased by $2 trillion
E) increased by $1 trillion