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AP® Macroeconomics

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Difficult

Fiscal Policy and Money Multiplier

APMACR-J1MUR6

Suppose the Government sees that the Aggregate Demand is $500 Billion below full employment.

If MPC is .8, then how much could be spent by Government, ceteris paribus, to right the Aggregate Demand level?

A

$500 Billion, the amount equal to the gap

B

$400 Billion

C

$100 Billion

D

$499.2 Billion

E

$480 Billion