Exhibit 11-3 Aggregate Demand and Supply Model Suppose the Economy

question 206

Multiple Choice

Exhibit 11-3 Aggregate demand and supply model Suppose the economy in Exhibit 11-3 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

• A)$200 billion.
• B)$250 billion.
• C)$500 billion.
• D)$1 trillion.