For a closed economy with no government, the equilibrium level of national income is $1000 billion. Households spend 80% of the income that they obtain. If full employment is reached when national income is $1200 billion, by how much does aggregate demand need to shift at the outset to eliminate the economy’s deflationary gap?
- A–$200 billion
- B–$40 billion
- C+$40 billion
- D+$200 billion