You Are Given the Following Information About Aggregate Demand at the Existing

question 62

Multiple Choice

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion, (2) investment = $40 billion, (3) government purchases = $90 billion, and (4) net export = $25 billion.If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP gap here?

• A)increase government spending and taxes
• B)decrease government spending and taxes
• C)decrease government spending and increase taxes
• D)increase government spending and decrease taxes

---

Definitions:

Marginal Revenue

The additional income that an organization receives from selling one more unit of a good or service.

Profit Maximizing

The process or strategy by which a firm adjusts its production to achieve the highest possible profit.

Price Elasticity

An assessment of the degree to which the demand for a commodity adjusts when its price changes.

Output Level

The quantity of goods or services produced by a firm or economy over a certain period.