In a certain economy, the components of aggregate spending are given by: C = 500 + 0.8(Y - T) - 300rI = 200 - 400rG = 200NX = 10T = 150Given the information about the economy above, the immediate impact on aggregate expenditures of a one-percentage-point increase in the real interest rate (r) from 5 percent to 6 percent is ________, and the eventual impact on short-run equilibrium output is ________.
A. an increase by 700 units; a decrease by 3,500 units.
B. a decrease by 35 units, a decrease by 35 units.
C. a decrease by 7 units, a decrease by 35 units.
D. an increase by 35 units; a decrease by 175 units.
Answer: C
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