Table 36-1 Suppose the Economy of Macroland Is Described by the Following

question 23

Multiple Choice

Table 36-1 Suppose the economy of Macroland is described by the following: C = 200 + 0.8 DI (DI = disposable income)
I = 300 + 0.2 Y − 50 r ( Y = GDP)
( r , the interest rate, is measured in percentage points. For example, a 9 percent interest rate is r = 9) . For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate at
R = 5
G = 750
T = 0.25 Y
X = 200
M = 150 + 0.2 Y
Hint: DI = Y − T
From Table 36-1, compute equilibrium GDP for Macroland.

• A) 3,000
• B) 2,950
• C) 2,625
• D) 2,525

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Definitions:

Incentive Function

The role of incentives in influencing the behavior and decisions of individuals or organizations.

Competitive Markets

Markets characterized by a large number of buyers and sellers, where no single entity controls the market prices.

Resource

Any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit, including natural resources, human resources, and financial resources.