Multiple Choice
If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume (MPC) is 0.80, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:
A) government spending by $200 billion.
B) taxes by $100 billion.
C) taxes by $1,000 billion.
D) government spending by $1,000 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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