Consider the Following Information Describing a Closed Economy with No

question 45

Multiple Choice

Consider the following information describing a closed economy with no government and where aggregate output is demand determined.All dollar figures are in billions. TABLE 21-3
-Refer to Table 21-3.Suppose this economy is in equilibrium.There is then a significant decline in house prices across the country.The likely effect is

• A)autonomous consumption will rise above $300 billion and equilibrium national income will therefore rise.
• B)autonomous saving will fall and equilibrium national income will therefore fall.
• C)autonomous saving will rise and equilibrium national income will therefore rise.
• D)autonomous investment will rise and equilibrium national income will therefore rise.
• E)autonomous consumption will fall below $300 billion and equilibrium national income will therefore fall.

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Definitions:

Nominal Wage

The amount of money paid to a worker per unit of time, measured in current currency terms without adjustment for inflation.

Price Level

A general measure of current prices for every type of good or service created in the economy.

Real Wage

The purchasing power of an individual's earnings, adjusted for inflation, reflecting the actual goods and services that wages can buy.