Suppose the Price Level Is fiXed, the MPC Is 0

question 133

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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