Suppose for Every Dollar Change in Household Wealth,consumption Expenditures Change

question 92

Multiple Choice

Suppose for every dollar change in household wealth,consumption expenditures change by $0.05.If real household wealth declines by $45 billion,potential GDP is $120 billion,and the multiplier effect for the second year after an expenditure shock is 1.1,what is the total change in output relative to potential for the second year?

• A) -1.28%
• B) -1.73%
• C) -2.06%
• D) -5.78%