Given a $500 billion AD shortfall and an MPC of 0.75, the desired fiscal stimulus would be:
A. A $2 trillion increase in government expenditures.
B. A $375 billion increase in government expenditures.
C. A $500 billion increase in government expenditures.
D. A $125 billion increase in government expenditures.
Answer:D
Given a $500 billion AD shortfall and an MPC of 0.75, the desired fiscal stimulus would be:
A. A $2 trillion increase in government expenditures. B. A $375 billion increase in government expenditures. C. A $500 billion increase in government expenditures. D. A $125 billion increase in government expenditures.