The Equilibrium Level of Real GDP Is $1,000, the Target

question 27

Multiple Choice

The equilibrium level of real GDP is $1,000, the target full-employment level of real GDP is $1,500, and the marginal propensity to consume is 0.75. The target can be reached if government spending is:

• A) increased by $100 billion.
• B) increased by $125 billion.
• C) increased by $500 billion.
• D) held constant.

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Definitions:

Incremental Change

A gradual, step-by-step approach to modifying processes, products, or services, often as part of a strategy to manage risk or introduce innovation.

Transformational Change

A profound or radical shift that fundamentally alters the nature or direction of an entity.

Modest Change

A minor adjustment or slight modification to a process, system, or product.

Gradual Change

Incremental alterations, modifications, or developments occurring slowly over a period of time.