Assume that the MPC is 0.8. Full employment is considered to be at a GDP level of $500 billion. The current GDP is $400 billion. The government is committed to a balanced budget. To achieve full employment, the government should _____ taxes by _____ and increase government spending by _____.
A) increase; $100 billion; $100 billion
B) increase; $20 billion; $100 billion
C) increase; $25 billion; $100 billion
D) decrease; $100 billion; $100 billion

Question

Quizplus · Accepted Answer

The government should increase taxes by $20 billion and increase government spending by $100 billion to achieve full employment.

Assume That the MPC Is 0