In the Simple Keynesian Model with No Government and Foreign

question 60

Multiple Choice

In the simple Keynesian model with no government and foreign sectors, assume that the economy is in equilibrium at an output level of $2 billion with a marginal propensity to consume of 0.9. If investment spending decreases by $0.05 billion, what is the new equilibrium output level?

• A) $1.95 billion
• B) $2.5 billion
• C) $1.9 billion
• D) $1.5 billion

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Definitions:

Covert Power

Influence exerted indirectly or through non-obvious means, often hidden or behind the scenes, to affect decision-making or outcomes.

Coercive Power

Authority or power that is based on the ability to punish or inflict sanctions on others.

Referent Power

Referent Power is a form of influence based on the charisma or likeability of an individual, leading others to emulate or follow them voluntarily.

Reward Power

The ability to influence others' behavior through the offering of positive incentives or benefits.