If Planned Aggregate Spending in an Economy Can Be Written

question 21

Multiple Choice

If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y − 20,000r, and potential output equals 34,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?

• A)7 percent
• B)3 percent
• C)6 percent
• D)5 percent