Imagine that the U.S. economy is in equilibrium at full employment without inflation where national income is at $6,700 billion. The MPC = 0.8 . If massive flooding along the Mississippi River leads Congress to approve a spending package of $10 billion to aid flood victims, the government must also take which of the following actions to keep the economy in equilibrium at full employment without

inflation?
a. increase taxes by $10 billion
b. decrease taxes by $10 billion
c. cut other government spending programs by $7.5 billion
d. increase taxes by $12.5 billion
e. decrease taxes by $12.5 billion

D