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Exhibit 20A-3  Macro AD/AS Model

Question 77

Multiple Choice

Exhibit 20A-3  Macro AD/AS Model
Exhibit 20A-3  Macro AD/AS Model As shown in Exhibit 20A-3, assume the marginal propensity to consume MPC 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 $2 trillion B) decreased by $2 trillion C) decreased by $.40 trillion D) increased by $.40 trillion E) increased by $.80 trillion As shown in Exhibit 20A-3, assume the marginal propensity to consume MPC equals 0.80. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E1 to full employment.


A) increased by $2 trillion
B) decreased by $2 trillion
C) decreased by $.40 trillion
D) increased by $.40 trillion
E) increased by $.80 trillion

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