You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion, (2) investment = $40 billion, (3) government purchases = $90 billion, and (4) net exports = $25 billion. If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

A. A decrease in government purchases and an increase in taxes
B. An increase in government purchases and a decrease in taxes
C. An increase in government purchases and taxes
D. A decrease in government purchases and taxes


Answer: B

Economics

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