1. Suppose the economy in Exhibit 15.11 is in equilibrium at point E 1 and the marginal propensity..

1. Suppose the economy in Exhibit 15.11 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by a. $200 billion. b. $250 billion. c. $500 billion. d. $1 trillion. 2. Beginning at equilibrium E1 in Exhibit 15.11, when the government increases spending or cuts taxes the economy will experience a. an inflationary recession. b. stagflation. c. cost-push inflation. d. demand-pull inflation.