(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given

question 105

Multiple Choice

(Table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table above, assume full employment income is $1,000 while the current equilibrium is $750. Now let exports rise by 50 and imports fall by 50. If the government wants to eliminate the recessionary gap while maintaining a balanced budget:

• A) it must increase spending by $100 and decrease taxes by $100.
• B) it must increase spending by $250 decrease taxes by $250.
• C) it must increase spending by $100 and increase taxes by $100.
• D) it must increase spending by $250 increase taxes by $250.

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