In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could:

A.Increase taxes by $16 billion
B.Increase taxes by $24 billion
C.Decrease government spending by $10 billion
D.Decrease government spending by $16 billion

ANSWER:

A.Increase taxes by $16 billion