Suppose equilibrium real GDP is currently at $800 billion and investment is $100 billion. If an increase in the interest rate reduces investment from $100 billion to $75 billion, and the MPC is 0.8, the new level of equilibrium real GDP will be:
A. $500 billion.
B. $600 billion.
C. $675 billion.
D. $775 billion.
Answer: C
You might also like to view...
Which of the following are short-term financial instruments?
A) a repurchase agreement B) a share of Walt Disney Corporation stock C) a Treasury note with a maturity of four years D) a residential mortgage
The optimal bidding strategy for an oral auction is
a. To shade your bid below your true value and drop out well before it is reached b. To shade your bid below your true value and drop out just when the shaded amount is reached c. To drop out when the bidding exceeds your true value d. To size up your competition to determine how much to shade your bid
Government's monopoly on force implies that government can both protect and violate rights
a. True b. False
In the aggregate expenditures model, if aggregate expenditures (AE) equal $6 trillion and GDP equals $7 trillion, then:
a. inventory depletion equals ?$1 trillion. b. inventory accumulation equals $1 trillion. c. investment equals $1 trillion. d. investment equals ?$1 trillion.