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:

Larger Territories

Expansive areas or regions under the control of a particular group, organism, or government, often associated with specific advantages or resources.

Causal Inferences

Causal inferences are conclusions about cause-and-effect relationships, often drawn from experiments or observational studies, looking at how one variable influences another.

Right Hemisphere

The half of the brain that controls the left side of the body, associated with creativity, spatial ability, and the processing of visual and auditory stimuli.

Left Hemisphere

The left side of the brain, primarily responsible for controlling the right side of the body and functions such as speech, logic, and analytical thinking.