Advanced Placement (AP), 24.10.2020 21:40 paper
If real GDP is $500 billion, full employment GDP is $200 billion, and the marginal propensity to consume is 0.75, then Congress should:
a. increase government spending by $100 billion.
b. decrease taxes by $100 billion.
c. increase government spending by $75 billion.
d. increases taxes by $100 billion.
e. increase government spending by $300 billion.
Please explain why! Not sure how to do this type of problem. Thanks!
Answers: 2
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