According to Keynesians, if an economy was in a recession and facing a $500 billion target gap, the government would have to increase its expenditures by ________________ in order to get the economy out of the recession. (Assume that the MPC = 0.8 and the nominal interest rate is 10 %.)
a. $50 billion
b. $100 billion
c. $45 billion
d. $500 billion
e. $40 billion
f. $125 billion

Answer rating: 100% (QA)

Change in equilibrium output Y spending multiplier x ch... View the full answer