Use the Information Below to Answer the Following Questions

question 161

Multiple Choice

Use the information below to answer the following questions.
Fact 11.3.1
An economy has a fixed price level, no imports, and no income taxes.MPC is 0.5 and real GDP is $200 billion.Businesses incr investment by $2 billion.
-Consider Fact 11.3.1.The increase in real GDP is

• A)$2 billion.
• B)$404 billion.
• C)$1.6 billion.
• D)$4 billion.
• E)$202 billion.

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Definitions:

Real GDP

A measure of the value of all goods and services produced within a country over a specific time period, adjusted for inflation.

Nominal Wage

The wage paid to employees in current dollars, without adjustment for inflation, reflecting the actual amount of money received.

Fisher Effect

Refers to the economic theory that real interest rates are independent of monetary measures, with any increase in expected inflation being matched by an equal increase in nominal interest rates over the long term.

Nominal Interest Rates

The interest rate before adjusting for inflation, representing the face value of interest paid or received.