Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 107

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is 0.75. Suppose the equilibrium level of real GDP at the prevailing price is $600 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

• A) $150 billion
• B) $450 billion
• C) $600 billion
• D) $800 billion

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced when holding two or more contradictory beliefs, values, or ideas simultaneously, often leading to a change in beliefs or behaviors.

Counterproductive Work Behavior

entails actions by employees that harm the interests and functioning of an organization, including theft, sabotage, and workplace aggression.

Organizational Citizenship Behavior

Voluntary employee behaviors that contribute to organizational goals by improving the context in which work takes place.

Baby Busters

A term sometimes used to refer to individuals born during periods of declining birth rates, particularly following the baby boom era.