In a Certain Economy, the Components of Aggregate Spending Are

question 128

Multiple Choice

In a certain economy, the components of aggregate spending are given by: C = 100 + 0.9(Y - T) - 500r
I = 150 - 1,000r
G = 200
NX = 50
T = 100
Given the information about the economy above, what would be the impact on short-run equilibrium output of a one-percentage-point decrease in the real interest rate from 6 percent to 5 percent?

• A) Short-run equilibrium output would increase by 150 units.
• B) Short-run equilibrium output would decrease by 1,500 units.
• C) Short-run equilibrium output would decrease by 150 units.
• D) Short-run equilibrium output would increase by 15 units.