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Suppose Inflation Is a Threat Because the Current Aggregate Demand

Question 61

Multiple Choice

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:


A) decreasing tax revenues by $600 billion.
B) decreasing government spending by $200 billion.
C) increasing tax revenues by $200 billion.
D) increasing government purchases by $150 billion.

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