Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion. If the MPC is .625, what change in aggregate expenditures is needed to achieve full employment?
A. A decrease of $12 billion.
B. An increase of $25 billion.
C. An increase of $10 billion.
D. An increase of $15 billion.
D. An increase of $15 billion.
You might also like to view...
The First Welfare Theorem holds that the allocation of goods resulting from competitive prices is "efficient," which is the equivalent of "equitable."
Answer the following statement true (T) or false (F)
In addition to open market operations and the required reserve ratio, another tool of monetary policy available to the Fed is
A) fiscal policy. B) tax rates and the progressivity of the income-tax system. C) government spending and various transfer-payment programs. D) the difference between the discount rate and the federal funds rate.
In practice, the actual size of the ________ is about 2.
A. saving function B. MPS C. MPC D. multiplier
The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A