Suppose the Economy Is Operating at Its Full-Employment-Noninflationary GDP and the MPC

Multiple Choice

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is .75.The federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation.To sustain full-employment-noninflationary GDP,government must:

A) reduce taxes by $28 billion.
B) reduce transfer payments by $21 billion.
C) increase taxes by $21 billion.
D) increase taxes by $28 billion.