Figure 13-5 -Refer to Figure 13-5. Let Y = Real GDP, AE

question 119

Multiple Choice

Figure 13-5
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_P = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + I_P, I_P is autonomous and the consumption function is C = $1,000 billion + 0.75Y. If firms produced a real GDP less than the Y*,

• A) AE would be greater than real GDP.
• B) AE would fall short of real GDP.
• C) actual investment would be greater than I_P.
• D) there would be an excess supply real GDP.

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Definitions:

Annuitant

The individual who receives the benefits or payments from an annuity plan.

Annuity

A finance-related product that ensures a continual payment stream to a recipient, mainly used in planning for life after work.

Ordinary Annuity

Steady cash flows facilitated at the decline of each era during a certain season.

Nominal Interest

The rate of interest quoted on a loan or bond without adjusting for inflation or other factors that could affect the real rate of return.