Suppose an economy that has a MPC of .75 is experiencing a $20 billion recessionary gap (aggregateexpenditures model) and is operating in the horizontal range of its aggregate supply curve (AD-AS model).If this economy wishes to achieve its full-employment output, it must shift:

A) its aggregate demand curve rightward by $80 billion.

B) both its aggregate demand curve and supply curve rightward by $20 billion.

C) its aggregate demand curve rightward by $20 billion.

D) its aggregate supply curve rightward by $20 billion

ANSWER:

A