Exhibit 17-1 Aggregate Demand and Supply Model

question 52

Multiple Choice

Exhibit 17-1 Aggregate demand and supply model

-Suppose the economy in Exhibit 17-1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.8.Following Keynesian economics,to restore full employment,the government should increase its spending by:

• A)$200 billion.
• B)$250 billion.
• C)$500 billion.
• D)$1 trillion.

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