Use the Following to Answer Question 132

Multiple Choice

Use the following to answer question 132:
Figure: Short-Run Equilibrium
-(Figure: Short-Run Equilibrium) Look at the figure Short-Run Equilibrium. The economy is in short-run equilibrium. To move the economy to potential GDP, the government should reduce its spending by an amount equal to:

A) (Y₁ - Y_P) .
B) (Y₁ - Y_P) / (1 - MPC) .
C) (Y₁ - Y_P) MPC.
D) (Y₁ - Y_P) (1 - MPC) .