Suppose the Price Level Is Fixed, the MPC Is 0

question 156

Multiple Choice

Suppose the price level is fixed, the MPC is 0.8, and the GDP gap is a negative $200 billion.To achieve full-employment output (exactly) , government should

• A)increase government expenditures by $200 billion.
• B)reduce taxes by $200 billion.
• C)increase government expenditures by $40 billion.
• D)reduce taxes by $160 billion.

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