If an economy was operating at an equilibrium level of output at $3,000 billion and full employment equilibrium was $4,000 billion, with a marginal propensity to save of 0.2 , a Keynesian economist would recommend:
A.
Increase government spending by $1,000 billion
B.
Increase government spending by $500 billion
C.
Increase government spending by $250 billion
D.
Decrease taxes by $1,000 billion
Exam No：AP Macroeconomics Problem Set 3 Year：2024 Question No：APMacroeconomics2024AP0098
Answer:
C
Knowledge points:
3.2 Multipliers
5.1 Fiscal and Monetary Policy Actions in the Short Run
Solution:
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