In an Economy Where Planned Aggregate Spending Is Given by PAE

question 35

Multiple Choice

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y − 20,000r, the interest rate is currently 2 percent (0.02) . If potential output equals 8,000, the central bank must ________ the interest rate to close the ________ gap.

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

---

Definitions:

Epigenetic Changes

Modifications in gene expression caused by mechanisms other than changes in the underlying DNA sequence.

Gate

A point of entry or exit in a fence or wall, usually consisting of a movable mechanism that can be opened or closed.

Fade From View

The process or act of something gradually becoming less visible or recognized over time.

Medial Forebrain Bundle

A complex neural pathway in the brain that plays a key role in the regulation of pleasure and reward, as well as various other behaviors.