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Suppose the economy is currently operating at an output level of $5,400 billion. Assume furthermore that potential output is $5,000. Which of the following would
Suppose the economy is currently operating at an output level of $5,400 billion. Assume furthermore that potential output is $5,000. Which of the following would be necessary to close this inflationary gap if the marginal propensity to consume is 0.75? A. Raise taxes by $400 billion. B. Increase spending by $400 billion. C. Decrease spending by $100 billion. D. Increase spending by $100 billion. E. Decrease transfer payments by $800 billion.
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