In a private closed economy where MPC = 0.8, if consumers reduce their spending by $10 billion and firms cut investments by $5 billion, then equilibrium real GDP will decrease by
A. $15 billion.
B. $75 billion.
C. $25 billion.
D. $18.8 billion.
Answer: B
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A. can be the same in a well-functioning free market. B. are never the same. C. matter only to the purchaser of the good. D. are not reflected in its price.
Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. Rogue can produce 15 chocolate bars per day with one employee, 29 with 2, 35 with 3 and 40 with 4 employees. Which statement is TRUE?
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A __________ exchange rate policy sets a fixed and unchanging value for the exchange rate against another currency.
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