Assume That Full-Employment Real GDP Is Y = $1,200 Billion

question 13

Multiple Choice

Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP,

• A) a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion.
• B) an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion.
• C) an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.
• D) a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion.

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