Given a $500 billion AD shortfall and an MPC of 0.75, the desired fiscal stimulus would be:

A) A $2 trillion increase in government expenditures.
B) A $375 billion increase in government expenditures.
C) A $500 billion increase in government expenditures.
D) A $125 billion increase in government expenditures.

ANSWER:

D) A $125 billion increase in government expenditures.