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Exhibit 16A-3  Macro AD/AS Model

Question 127

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Exhibit 16A-3  Macro AD/AS Model
Exhibit 16A-3  Macro AD/AS Model As shown in Exhibit 16A-3, assume the marginal propensity to consume MPC equals 0.80.  Using discretionary fiscal policy, federal government spending should be _________  in order to restore the economy from E <sub> 1 </sub> to full employment. A) increased by $2 trillion B) decreased by $2 trillion C) decreased by $.40 trillion D) increased by $.80 trillion
As shown in Exhibit 16A-3, assume the marginal propensity to consume MPC equals 0.80.  Using discretionary fiscal policy, federal government spending should be _________  in order to restore the economy from E 1 to full employment.


A) increased by $2 trillion
B) decreased by $2 trillion
C) decreased by $.40 trillion
D) increased by $.80 trillion

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