Assume that the full-employment level of output is $500, and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $450 and, at the price level of 100, current aggregate demand is $400. If the government wants to move the economy back to the full-employment level of output and the MPC is 0.75, then it should .a. reduce government purchases by $100.
b. increase government purchases by $100.
c. reduce government purchases by $25.
d. increase government purchases by $25.
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Assume that the full-employment level of output is $500, and the price level associated with full-em...
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