Exhibit 15-3 Aggregate Demand and Supply Model

question 107

Multiple Choice

Exhibit 15-3 Aggregate demand and supply model

-Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.80.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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Definitions:

Stephen Foster

An American songwriter known for his parlor and minstrel music in the 19th century, often referred to as the "father of American music."

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An individual skilled in creating lyrics and melodies that are typically combined to produce songs.

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A novel by Nathaniel Hawthorne that explores themes of legalism, sin, and guilt in Puritan society.

Hawthorne

Nathaniel Hawthorne, an American novelist and short story writer, known for his dark romanticism and works such as "The Scarlet Letter" and "The House of the Seven Gables."