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, what would be the impact on short-run equilibrium output of a one-percentage-point increase in the real interest rate from 4 percent to 5 percent?
A. Short-run equilibrium output would decrease by 7 units.
B. Short-run equilibrium output would increase by 35 units.
C. Short-run equilibrium output would decrease by 700 units.
D. Short-run equilibrium output would decrease by 35 units.
Answer: D
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