Multiple Choice
If no fiscal policy changes are implemented to fight inflation, suppose the aggregate demand curve will exceed the current aggregate demand curve by $900 billion at any level of prices. Assuming the marginal propensity to consume is 0.90, this increase in aggregate demand could be prevented by:
A) increasing government spending by $500 billion.
B) increasing government spending by $140 billion.
C) decreasing taxes by $40 billion.
D) increasing taxes by $100 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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