You Are Given the Following Information About Aggregate Demand at the Existing

question 95

Multiple Choice

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

• A) Increase government spending and taxes
• B) Decrease government spending and taxes
• C) Decrease government spending and increase taxes
• D) Increase government spending and decrease taxes

---

Definitions:

Profit Maximizing

The process or strategy employed by a firm to determine the price, output level, or operational scale that leads to the highest possible profit.

Efficient Level

The optimum point at which a particular function, operation, or activity is most effective or produces the best results with the least waste of resources.

Society's View

The collective opinions, beliefs, and values held by the majority of people in a society about a particular topic.

Total Revenue

The overall amount of money generated by a firm from its business activities, calculated by multiplying the selling price by the number of units sold.