The Economy Is in Equilibrium,TP = TE,and Real GDP Is

question 153

Multiple Choice

The economy is in equilibrium,TP = TE,and Real GDP is $4,555 billion.The MPC is 0.80,the multiplier is operative,and idle resources exist at each expenditure round.Government purchases rise by $10 billion.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,business firms ___________ the quantity of goods and services they produce,and Real GDP __________ by __________.

• A) TE; downward; fall; increase; rises; $10 billion.
• B) TP; rightward; fall; decrease; falls; $50 billion
• C) TE; upward; fall; increase; rises; $50 billion
• D) TE; downward; rise; increase; rises,$50 billion

---

Definitions:

Incentive Theory

A motivational theory suggesting that behavior is driven by a desire for external rewards and incentives.

Drive Theory

A theory that suggests motivation is based on the desire to reduce internal tension caused by unmet biological needs.

Homeostatic

Relating to or denoting the self-regulating process by which biological systems tend to maintain stability while adjusting to conditions that are optimal for survival.

Sensitivity

The quality or condition of being sensitive; the ability to perceive or feel emotions or physical stimuli.