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Suppose that the economy is currently operating below the full employment level of GDP and the federal government wants to increase the level of aggregate
Suppose that the economy is currently operating below the full employment level of GDP and the federal government wants to increase the level of aggregate demand in the economy next period by $150 billion (ie within the AD-AS framework it wants to horizontally shift out the aggregate demand curve by $150 billion), and it wants to do this by using expansionary fiscal policy. Assuming the marginal propensity to consume is 0.6, this increase in aggregate demand could be achieved by
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