In an Economy Where Planned Aggregate Spending Is Given by PAE

question 54

Multiple Choice

In an economy where planned aggregate spending is given by PAE = 3,000 + .75Y − 10,000r, the central bank is currently setting the interest rate at 0.06 (6 percent) . If potential output equals 9,500, the central bank must ________ the interest rate to close the ________ gap.

• A)lower; expansionary
• B)raise; expansionary
• C)lower; recessionary
• D)raise; recessionary

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Definitions:

Conditioned Response

A conditioned reaction developed in response to a previously irrelevant stimulus after its frequent association with a stimulus that elicits an automatic response.

Original CS

In classical conditioning, the conditioned stimulus (CS) that is consistently paired with an unconditioned stimulus (US) to produce a conditioned response (CR).

24 Hours

The period of time it takes for the Earth to complete one full rotation on its axis, typically defined as a day.

Discrimination

An aspect of learning in which the organism learns to respond differently to stimuli that have been associated with a US (or reinforcement), and stimuli that have not.