An economy has government purchases of 2000. Desired national saving and desired investment are given by Sd = 200 + 5000r + 0.10Y - 0.20G Id = 1000 - 4000rWhen the full-employment level of output equals 5000, then the level of investment when the goods market is in equilibrium will be
A. 422.4.
B. 600.0.
C. 66.8.
D. 688.9.
Answer: D
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A) increases; moral hazard B) decreases; moral hazard C) decreases; adverse selection D) increases; adverse selection
Refer to the following graph. An increase in aggregate demand when the economy is already at full employment is reflected as a rightward shift of the aggregate demand curve from
a. aggregate demand would have to increase.
b. aggregate demand would have to decrease.
c. aggregate supply would have to increase.
d. aggregate supply would have to decrease.
One reason why the Soviet Union grew slowly in the 20th century compared to the United States and Western Europe was that it:
A. licensed too many private enterprises, creating destructive competition. B. invested in too many consumer goods. C. did not invest as much in capital goods. D. did not provide incentives for individuals to produce what consumers valued.
An elastic demand indicates that
A. relatively large changes in price are required to obtain a relatively small change in quantity demanded. B. relatively small changes in price lead to relatively large changes in quantity demanded. C. relatively large changes in quantity demanded lead to relatively large changes in price. D. quantity demanded does not vary with changes in the price.