In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 bi

Question

In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 billion at any output level, government spending must be increased by _____ or net taxes must be decreased by _____.

A. $20 billion; $20 billion

B. more than $20 billion; more than $20 billion

C. less than $20 billion; less than $20 billion

D. $20 billion; more than $20 billion

E. more than $20 billion; $20 billion

Answer 1

C. less than $20 billion; less than $20 billion