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Suppose that real GDP is $1,500, potential GDP is $1,200, and the marginal propensity to consume is 0.8. If the government is going to close the gap by changing government purchases of goods and services and imposes no taxes, what specific fiscal policy action should policy makers take?
Marginal Cost
The extra cost incurred from the production of an additional unit, emphasizing its role in decision-making processes.
Average Total Cost
The aggregate expense of manufacturing divided by the total number of units produced.
Average Fixed Cost
The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.
Average Variable Cost
The total variable cost per unit of output, which includes costs that change with the amount of production.
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