Exhibit 20A-3 Macro AD/AS Model

question 2

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 E₁ to full employment.

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

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Definitions:

Unilateral Contract

A type of agreement where an offer can only be accepted through the performance of an action by the party receiving the offer.

Hard Drive

A data storage device used for storing and retrieving digital information using rapidly rotating disks coated with magnetic material.

Adequacy Of Consideration

The sufficiency of what is exchanged in a contract to make the agreement enforceable, ensuring each party receives something of value.

Bankruptcy

A legal procedure for dealing with debt problems of individuals and businesses; officially declared inability to pay outstanding debts.