In an Economy Where Planned Aggregate Spending Is Given by PAE

question 36

Multiple Choice

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y − 20,000r, the interest rate is currently 5 percent (0.05) . If potential output equals 11,750, the central bank must ________ the interest rate to close the ________ gap.

• A)reduce; expansionary
• B)reduce; recessionary
• C)raise; recessionary
• D)raise; expansionary

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Definitions:

Sense of Power

The feeling or belief in one's ability to influence events, others, or the environment effectively.

Lunar Events

Phenomena that occur with or on the moon, including phases, eclipses, and other celestial occurrences involving the moon.

Homicide Rates

The number of homicides per unit of population over a given time period, often used as a societal safety indicator.

Murder Rates

The number of murders within a specified area or population over a certain period of time.