Assume That Full-Employment Real GDP Is Y = $1,200 Billion

question 13

Multiple Choice

Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP,

• A) a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion.
• B) an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion.
• C) an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.
• D) a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion.

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Definitions:

Ranked

The process or result of ordering or classifying entities based on criteria or measurements to establish a hierarchy or priority.

Interval Data

A type of numerical data that contains meaningful distances between measurements, but no true zero point.

Fahrenheit Scale

A temperature scale where the freezing and boiling points of water are 32 degrees and 212 degrees, respectively.

Temperature

The measure of the hotness or coldness of a body or environment, indicating the degree of heat energy present.