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

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Definitions:

Administrative Reason

A justification or cause related to management or procedural issues within an organization.

Merit Pay

A salary increase awarded to employees based on their job performance, used as a tool for motivation and encouragement of high performance.

Performance Appraisals

A systematic evaluation of an employee's performance in their job roles over a specific period.

Self-Appraisals

A process by which employees evaluate their own job performance and productivity, often as part of their performance review.