Question 29
1 pts
In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions, the government should
increase government expenditures.
increase tax rates and/or reduce government spending.
encourage private investment by reducing corporate income taxes.
discourage personal saving by reducing the interest rate on government bonds.