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

question 89

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 third year after an expenditure shock is 0.7,what is the total change in output relative to potential for the third year?

• A) -1.31%
• B) -1.84%
• C) -2.68%
• D) -3.57%

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