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Exhibit 15-7  Aggregate Demand and Supply Model Suppose the Economy

Question 158

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Exhibit 15-7  Aggregate demand and supply model Exhibit 15-7  Aggregate demand and supply model Suppose the economy in Exhibit 15-7 is in equilibrium at point E<sub>1</sub> and the marginal propensity to consumer ( MPC ) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150, the government should reduce its spending by: A) $20 billion. B) $100 billion. C) $133 billion. D) $400 billion. Suppose the economy in Exhibit 15-7 is in equilibrium at point E1 and the marginal propensity to consumer ( MPC ) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150, the government should reduce its spending by:


A) $20 billion.
B) $100 billion.
C) $133 billion.
D) $400 billion.

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