Hypothetical economy: C=$600 billion, I=$300 billion, G=$150 bill Assume for the long run: 1. For every 1% increase (decrease) in interest rate, planned investment decreases (increases) by $5 billion. 2. For every $10 billion increase (decrease) in government spending, interest rate increases (decreases) by 1%. 3. The MPC = 0.8 Assuming the economy is in equilibrium, how much is equilibrium output?
A) $750 billion.
B) $900 billion
C) $1,050 billion
D) $1,350 bill
Answer: C) $1,050 billion
You might also like to view...
In the figure above, households
A) receive transfers directly from governments. B) buy goods and services from governments in goods markets. C) receive transfers from governments through factor markets. D) sell factors of production to governments. E) pay taxes to governments through factor markets.
If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase
Indicate whether the statement is true or false
Suppose that the demand for oranges increases. Carefully explain how the rationing function of price will restore market equilibrium
What will be an ideal response?
Which of the following is a distinguishing characteristic of a user charge?
a. Persons pay roughly in proportion to the extent that they use the good or service. b. Persons with high incomes pay a larger amount than persons with lower incomes for the same good or service. c. Persons with high incomes pay a larger percentage of their income than persons with lower incomes for the same good or service. d. Persons with high incomes pay a smaller percentage of their income than persons with lower incomes for the same good or service.