Suppose the Price Level Is fiXed, the MPC Is 0

question 214

Multiple Choice

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly) , government should

• A) increase government expenditures by $80 billion.
• B) reduce government expenditures by $40 billion.
• C) reduce taxes by $40 billion.
• D) reduce taxes by $80 billion.

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Definitions:

Additional Hour

An extra unit of time beyond the standard or expected duration, often applied in contexts like work or study to represent overtime or extended periods.

Leisure

Free time not taken up by work, when an individual can choose to relax, enjoy hobbies, or engage in any non-work activities.

Time Allocation

The process of assigning time to different activities in a way that optimizes the achievement of goals or maximizes welfare.

Different Activities

Various tasks or actions taken by individuals, organizations, or systems, distinct in nature and purpose.