To close an inflationary expenditure gap of $20 billion in an economy with a marginal propensity to consume of 0.8, it would be necessary to:
A) Decrease the aggregate expenditures schedule by $20 billion
B) Decrease the aggregate expenditures schedule by $4 billion
C) Increase the aggregate expenditures schedule by $20 billion
D) Increase the aggregate expenditures schedule by $4 billion

Question

Quizplus · Accepted Answer

The Answer of To close an inflationary expenditure gap of $20 billion in an economy with a marginal propensity to consume of 0.8, it would be necessary to:
A) Decrease the aggregate expenditures schedule by $20 billion
B) Decrease the aggregate expenditures schedule by $4 billion
C) Increase the aggregate expenditures schedule by $20 billion
D) Increase the aggregate expenditures schedule by $4 billion

To Close an Inflationary Expenditure Gap of $20 Billion in an Economy