Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 183

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G = Government Purchases. Consider a simple aggregate expenditures model, where
AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. The MPC is 0.6. If investment expenditures rise by $100 billion, the equilibrium level of real GDP of rises by

• A) $250 billion.
• B) $300 billion.
• C) $500 billion.
• D) $1,500 billion.

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