Table 101 (All Values Are in Billions of Dollars)
-Refer to Table

question 54

Multiple Choice

Table 10.1
$$\begin{array} { | l | l | } \hline \text { Consurmpticn } & C = \$ 1.0 + 0.75 \mathrm { YD } \\\hline \text { Irvestmernt } & = \$ 1.9 \\\hline \text { Goverument purchases } & = \$ 2 \\\hline \text { Net exports } & = - \$ 0.5 \\\hline \text { Taxes } & = \$ 0 \\\hline \text { Goverument trarssfer } & \\\text { gayments } & = \$ 0\end{array}$$
(all values are in billions of dollars)
-Refer to Table 10.1.Suppose that all of the information given in the table remains the same except that taxes equal $0.5 billion.If potential GDP equals $17 billion,by how much would government purchases have to change for equilibrium GDP to equal potential GDP?

• A) $0.225 billion
• B) $1.25 billion
• C) $1.5 billion
• D) $5 billion

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Definitions:

Foreign Subsidiary

A company that is partially or wholly owned by another company (parent company) but is based in a different country.

Dollar/Peso Exchange Rate

The value of one United States dollar expressed in terms of the number of Mexican pesos it can be exchanged for, subject to fluctuation based on market conditions.

Long-Run Exposure

Refers to the potential risks and returns to a business or investment over a long period, considering various economic and market conditions.