In a Certain Year the Aggregate Demand at the Existing

question 227

Multiple Choice

In a certain year the aggregate demand at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases.Full-employment GDP is $200 billion.To obtain full employment under these conditions the government should:

• A)encourage personal saving by increasing the interest rate on government bonds.
• B)decrease government expenditures.
• C)reduce tax rates and increase government spending.
• D)discourage private investment by increasing corporate income taxes.