In a Certain Economy, the Components of Planned Spending Are

question 53

Multiple Choice

In a certain economy, the components of planned spending are given by: C = 500 + 0.8(Y - T) - 300r
Ip = 200 - 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, what would be the impact on induced expenditures of a one-percentage-point increase in the real interest rate?

• A)Induced expenditures would increase by 35 units.
• B)Induced expenditures would not change.
• C)Induced expenditures would decrease by 35 units.
• D)Induced expenditures would decrease by 7 units.

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