Multiple Choice
Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.50, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending) . If an increase of $1,000 billion aggregate demand can restore full employment, the government should:
A) increase spending by $250 billion.
B) decrease spending by $500 billion.
C) increase spending by $1,000 billion.
D) increase spending by $500 billion.
Correct Answer:
Verified
Correct Answer:
Verified
Q5: When the economy enters a recession, automatic
Q18: Contractionary fiscal policy is deliberate government action
Q26: Mathematically, the value of the tax multiplier
Q43: Which of the following would most likely
Q93: If an inflationary boom exists, the appropriate
Q95: Exhibit 15-1 Disposable income and consumption data <img
Q96: Assume the marginal propensity to consume (MPC)
Q97: Assume that an economy's real GDP multiplier
Q99: Exhibit 15-3 Aggregate demand and supply model <img
Q103: If the marginal propensity to save (MPS)