Question: Vandervenstan's MPC is 0.5 and the government decides to decrease spending on goods and services by $100 billion and decrease lump sum taxes by $50
Vandervenstan's MPC is 0.5 and the government decides to decrease spending on goods and services by $100 billion and decrease lump sum taxes by $50 billion. All else equal, the outcome of this policy will
A. return the economy to full employment.
B. leave the economy in a recessionary gap of $150 billion.
C. leave the economy in an inflationary gap of $100 billion.
D. leave the economy in a recessionary gap of $550 billion.
E. leave the economy in an inflationary gap of $50 billion.
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