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Exhibit 20A-4  Macro AD/AS Model as Shown in Exhibit 20A-4

Question 16

Multiple Choice

Exhibit 20A-4  Macro AD/AS Model Exhibit 20A-4  Macro AD/AS Model As shown in Exhibit 20A-4, assume the marginal propensity to consume MPC equals 0.75. 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 $.25 trillion B) decreased by $.25 trillion C) decreased by $2 trillion D) increased by $2 trillion E) increased by $1 trillion As shown in Exhibit 20A-4, assume the marginal propensity to consume MPC equals 0.75. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E1 to full employment.


A) increased by $.25 trillion
B) decreased by $.25 trillion
C) decreased by $2 trillion
D) increased by $2 trillion
E) increased by $1 trillion

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