Exhibit 20A-4  Macro AD/AS Model as Shown in Exhibit 20A-4

question 16

Multiple Choice

Exhibit 20A-4  Macro AD/AS Model As shown in Exhibit 20A-4, assume the marginal propensity to consume MPC equals 0.75. Using discretionary fiscal policy, federal government spending should be ____ in order to restore the economy from E₁ to full employment.

• A) increased by $.25 trillion
• B) decreased by $.25 trillion
• C) decreased by $2 trillion
• D) increased by $2 trillion
• E) increased by $1 trillion

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Definitions:

Payment Stream

A sequence of payment installments made over a period of time, often associated with loans or annuities.

Rented Capital

The use of assets or equipment by a firm for a period of time in exchange for payment without owning them.

Capital Usage

Refers to how assets are employed within a firm to generate value, emphasizing the effective application of physical and financial capital.

Capital Inputs

The goods or services used to produce other goods or services, particularly those which are fixed like machinery or buildings versus labor.