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​ Exhibit 16-4 Macro AD/AS Model

Question 107

Multiple Choice

​ Exhibit 16-4 Macro AD/AS Model
​ Exhibit 16-4 Macro AD/AS Model As shown in Exhibit 16A-4, assume the marginal propensity to consume 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) decreased by $.20 trillion
As shown in Exhibit 16A-4, assume the marginal propensity to consume equals 0.80.  Using discretionary fiscal policy, federal government spending should be _________  in order to restore the economy from E 1 to full employment.


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

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