Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.75, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending). If an increase of $1,000 billion aggregate demand can restore full employment, the government should:
a. increase spending by $250 billion.
b. decrease spending by $750 billion.
c. increase spending by $1,000 billion.
d. increase spending by $750 billion.
a
Economics
You might also like to view...
On the farm, which of the following people had the highest labor value?
(a) A woman (b) A man (c) A child (d) A grandparent
Economics
Vertical contracts aim to
a. Incentivize the manufacturers to undertake costly activities, which they may not realize the full benefits of on their own b. Incentivize the retailers to undertake costly activities, which they may not realize the full benefits of on their own c. Incentivize the retailer and the manufacturer to undertake activities that reduce profits for the supply chain d. Both A&B
Economics