Exhibit 20A-3  Macro AD/AS Model

question 67

Multiple Choice

Exhibit 20A-3  Macro AD/AS Model

As shown in Exhibit 20A-3, assume the marginal propensity to consume MPC equals 0.80.  Using discretionary fiscal policy, federal government spending should be _________  in order to restore the economy from E ₁ to full employment.

• A) increased by $2 trillion
• B) decreased by $2 trillion
• C) decreased by $.40 trillion
• D) increased by $.80 trillion

---

Definitions:

LSD

LSD, or lysergic acid diethylamide, is a powerful hallucinogenic drug known for altering perception and mood.

Mild Hallucinogen

A substance that induces subtle alterations in perception, mood, and thought, without causing intense hallucinations or loss of reality.

AIDS

Acquired Immune Deficiency Syndrome, a critical illness triggered by the human immunodeficiency virus (HIV) that drastically impairs the immune system.

Marijuana

A mind-altering substance derived from the Cannabis plant, utilized for either therapeutic or leisure activities.