The Figure Given Below Depicts Macroeconomic Equilibrium in a Closed

question 88

Multiple Choice

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5.
Figure 10.5

-Refer to Figure 10.5. If the target or potential level of real GDP is $1,200, then at an equilibrium real GDP level of $900:

• A) the GDP gap is zero.
• B) there exists a recessionary gap that could be closed by a $200 decrease in planned aggregate expenditures.
• C) the GDP gap is $200.
• D) actual real GDP exceeds potential real GDP by $300.
• E) there exists a recessionary gap that could be closed by a $200 increase in autonomous investment spending.

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Definitions:

Degrees of Freedom

The amount of free variables or measures that may change within an analysis while still adhering to all limitations.

T-statistic

A type of statistic used to estimate the significance of a difference between two sample means, given in terms of standard error.

Alpha

In statistical hypothesis testing, it represents the probability of committing a Type I error; the threshold significance level.

Critical Values

Thresholds in statistical hypothesis testing that determine the cutoff points for rejecting or not rejecting the null hypothesis.