You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion; (2) investment = $40 billion; (3) government purchases = $90 billion; and (4) net export = $25 billion. If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

A.Increase government spending and taxes
B.Decrease government spending and taxes
C.Decrease government spending and increase taxes
D.Increase government spending and decrease taxes

ANSWER:

D