In the Simple Keynesian Model with No Government or Foreign

question 107

Multiple Choice

In the simple Keynesian model with no government or 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) $1.5 billion
• B) $1.9 billion
• C) $1.95 billion
• D) $2.5 billion

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Definitions:

Ruptured Follicle

The release of an ovum from a follicle in the ovary during the menstrual cycle, often referred to as ovulation.

Corpus Luteum

A temporary endocrine structure in female ovaries that is involved in the production of progesterone during the menstrual cycle and early pregnancy.

Vesicular Follicle

A fluid-filled structure in the ovary that contains a maturing ovum or egg.

Interstitial Cell

Cells located in the spaces between the organs or tissues of the body, often referring to cells in the testes that produce testosterone or in various other tissues for support and repair.