In a Certain Economy, the Components of Aggregate Spending Are

question 26

Multiple Choice

In a certain economy, the components of aggregate spending are given by: C = 500 + 0.8(Y - T) - 300r
I = 200 - 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, the immediate impact on aggregate expenditures of a one-percentage-point increase in the real interest rate (r) from 5 percent to 6 percent is ___, and the eventual impact on short-run equilibrium output is ______.

• A) an increase by 700 units; a decrease by 3,500 units.
• B) an increase by 35 units; a decrease by 175 units.
• C) a decrease by 7 units, a decrease by 35 units.
• D) a decrease by 35 units, a decrease by 35 units.

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