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:

Net Exports

The difference between a country’s total exports of goods and services and its total imports of them. Positive net exports indicate a trade surplus, while negative net exports indicate a trade deficit.

Chinese Currency

The official currency of China, known as the Renminbi (RMB) or commonly referred to as the Yuan (CNY).

Scrap Metal

Discarded metal suitable for reprocessing or recycling.

Pharmaceutical

Pertaining to the research, development, and manufacture of drugs and medications.