Suppose the Price Level Is fiXed, the MPC Is 0

question 61

Multiple Choice

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly) , government should

• A) increase government expenditures by $100 billion.
• B) increase government expenditures by $50 billion.
• C) reduce taxes by $50 billion.
• D) reduce taxes by $200 billion.

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