Exhibit 11-3 Aggregate demand and supply model Price level (CPI) 250 200 150 125 100 0...
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Exhibit 11-3 Aggregate demand and supply model Price level (CPI) 250 200 150 125 100 0 m AS E₂ AD₂ Full employment AD₁ 8.0 8.5 9.0 9.5 10.0 10.5 Real GDP (trillions of dollars per year) 8.0 8.5 9.0 9.5 10.0 10.5 Real GDP (trillions of dollars per year) Suppose the economy in Exhibit 11-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by: a. $0.20 trillion. O b.$0.50 trillion. O c. $1 trillion. O d. $250 billion. Exhibit 11-3 Aggregate demand and supply model Price level (CPI) 250 200 150 125 100 0 m AS E₂ AD₂ Full employment AD₁ 8.0 8.5 9.0 9.5 10.0 10.5 Real GDP (trillions of dollars per year) 8.0 8.5 9.0 9.5 10.0 10.5 Real GDP (trillions of dollars per year) Suppose the economy in Exhibit 11-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by: a. $0.20 trillion. O b.$0.50 trillion. O c. $1 trillion. O d. $250 billion.
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