Use the Following to Answer Questions

question 94

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Expenditures and Real GDP 2
-(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy where AE = C + I_P, I_P is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of the multiplier?

• A) 0.75
• B) 1.33
• C) 4.00
• D) It depends on the ∆AE and the ∆Y since the multiplier formula is ∆AE ÷∆Y.

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Definitions:

U.S. GNP

Gross National Product of the United States, which is the total market value of all final goods and services produced by residents of the country within a specific time period, regardless of production location.

American Doctor

A licensed medical practitioner in the United States qualified to diagnose and treat illnesses, injuries, and other health conditions.

Net Exports

The net trade balance of a country, calculated by subtracting its total imports from its total exports.

Imports

Products and services imported from other countries for the purpose of selling them domestically.