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Exhibit 11-7 Aggregate Demand and Supply Model Suppose the Economy

Question 156

Multiple Choice

Exhibit 11-7 Aggregate demand and supply model Exhibit 11-7 Aggregate demand and supply model Suppose the economy in Exhibit 11-7 is in equilibrium at point E<sub>1</sub> and the marginal propensity to consumer (MPC) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150, the government should reduce its spending by: A) $20 billion. B) $100 billion. C) $133 billion. D) $400 billion. Suppose the economy in Exhibit 11-7 is in equilibrium at point E1 and the marginal propensity to consumer (MPC) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150, the government should reduce its spending by:


A) $20 billion.
B) $100 billion.
C) $133 billion.
D) $400 billion.

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