In an Economy Where Planned Aggregate Spending Is Given by PAE

question 36

Multiple Choice

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y − 20,000r, the interest rate is currently 5 percent (0.05) . If potential output equals 11,750, the central bank must ________ the interest rate to close the ________ gap.

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

---

Definitions:

Average Score

The sum of all scores divided by the number of scores, used to determine a central or typical value in a set of data.

Months

Units of time, approximately 30 to 31 days in length, used to measure durations and organize the calendar year.

Solve

To find the solution or answer to a mathematical problem or equation.

Calculator

An electronic or software tool used for performing mathematical calculations, ranging from basic arithmetic to complex functions.