Assume the Marginal Propensity to Consume (MPC) Is 0

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below full-employment real GDP. To achieve full employment, aggregate demand (AD) must be increased $2 trillion. Following discretionary fiscal policy, government spending should be increased:

A) $0.25 trillion.
B) $1 trillion.
C) $0.5 trillion.
D) $2 trillion.