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Let's assume that the economy is in a recession, operating $100 billion below the full employment ...

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Let's assume that the economy is in a recession, operating $100 billion below the full employment ...

Let's assume that the economy is in a recession, operating $100 billion below the full employment output. If the marginal propensity to consume is 0.8, in what direction and by what amount should the level of government spending be changed?
A) decrease government spending by $100 billion
B) increase government spending by $100 billion
C) decrease government spending by $20 billion
D) increase government spending by $20 billion
E) increase government spending by $80 billion

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Introduction to Economic Reasoning

Edition: 8^th

Author: Rohlf

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