Suppose That the Economy Is at Full Employment, the Price

question 60

Multiple Choice

Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $10 billion. In the short run ________, and in the long run ________.

• A)real GDP increases by less than $20 billion; real GDP does not change
• B)real GDP increases by more than $20 billion; real GDP does not change
• C)real GDP does not change; real GDP increases by at least $20 billion
• D)real GDP does not change; real GDP increases by less than $20 billion
• E)real GDP does not change; real GDP does not change

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Definitions:

Indirect Method

A technique used in comprehensive cash flow statements, it adjusts net income for non-cash transactions and changes in working capital to calculate net cash from operating activities.

Cash Flow Statement

A financial report that provides a summary of the cash inflows and outflows for a business over a specific period.

Marketable Securities

Financial instruments and assets that can be easily translated into cash because they have high liquidity and short maturities.

Accounts Receivable

Money owed to a company by its customers for products or services provided on credit.