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 $410. 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 taxes by $30.
B. increase taxes by $30.
C. reduce taxes by $90.
D. increase taxes by $90.


Answer: A

Economics

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Economics