Exhibit 20A-3 Macro AD/AS Model

question 24

Multiple Choice

Exhibit 20A-3 Macro AD/AS Model

-As shown in Exhibit 20A-3,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 $1 trillion
• B) increased by $2 trillion
• C) decreased by $2 trillion
• D) increased by $.50 trillion
• E) increased by $.80 trillion