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Exhibit 15-2 Aggregate Demand and Supply Model

Question 166

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Exhibit 15-2 Aggregate demand and supply model
Exhibit 15-2 Aggregate demand and supply model -Suppose the economy in Exhibit 15-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75.Following Keynesian economics,the federal government can move the economy to full employment at point E₂ by: A) decreasing government spending by $750 billion. B) decreasing government spending by $100 billion. C) increasing government spending by $25 billion. D) decreasing government spending by $25 billion. E) None of the above.
-Suppose the economy in Exhibit 15-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75.Following Keynesian economics,the federal government can move the economy to full employment at point E₂ by:


A) decreasing government spending by $750 billion.
B) decreasing government spending by $100 billion.
C) increasing government spending by $25 billion.
D) decreasing government spending by $25 billion.
E) None of the above.

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