In a Simple Economy in Which Prices Are Constant and with No

question 431

Multiple Choice

In a simple economy in which prices are constant and with no income taxes or imports, the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

• A) an increase in investment of $200 billion is needed to generate the desired increase of $500 billion.
• B) consumption spending needs to increase by $500 billion.
• C) saving needs to be reduced by $500 billion in order to generate the extra $500 billion.
• D) an increase in autonomous expenditure of $100 billion will lead to the increase of $500 billion.