You are given the following information about aggregate demand at the existing p

Question

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion; (2) investment = $40 billion; (3) government purchases = $90 billion; and (4) net exports = $25 billion. If the full employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with the goal of achieving full employment?

a. increase government spending and taxes
b. decrease government spending and taxes
c. decrease government spending and increase taxes
d. increase government spending and decrease taxes

Explanation / Answer

d. increase government spending and decrease taxes must increase consumption by government and people

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