In a certain economy, the components of aggregate spending are given by: C = 100 + 0.9(Y - T) - 500rI = 150 - 1,000rG = 200NX = 50T = 100Given 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 4 percent is ________, and the eventual impact on short-run equilibrium output is ________.
A. an increase by 15 units; a increase by 150 units.
B. an increase by 150 units; a decrease by 1,500 units.
C. an increase by 150 units, an increase by 150 units.
D. a decrease by 15 units, a decrease by 150 units.
Answer: A
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