The Figure Given Below Depicts Macroeconomic Equilibrium in a Closed

question 47

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. Assume that there is a recessionary gap that can be closed by a $500 increase in planned aggregate expenditures. If the economy is initially in equilibrium with a real GDP level of $900, then the target or potential level of real GDP must be:

• A) $333.33.
• B) $400.
• C) $750.
• D) $1,400.
• E) $1,650.

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