The Following Information Is for a Closed Economy: Refer

question 20

Multiple Choice

The following information is for a closed economy: Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

• A)will rise to $700.
• B)will rise to $600.
• C)will rise to $500.
• D)may either rise or fall.

---

Definitions:

Policy Announcement

A policy announcement is an official statement made by a government or institution detailing specific plans or changes in policy aimed at affecting economic or social outcomes.

Money Expansion

The increase in the total quantity of money in circulation within an economy, often achieved through central banking policies.

Fed Officials

Members of the Federal Reserve, the central banking system of the United States, who are responsible for monetary policy decisions.

Rational Expectations Theory

A hypothesis proposing that individuals form forecasts about the future based on all available information in an unbiased and consistent manner.