In an Economy Where Aggregate Spending Is Given by Y

question 96

Multiple Choice

In an economy where aggregate spending is given by Y = 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

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Definitions:

Glycogen

A multibranched polysaccharide of glucose that serves as a form of energy storage in humans, animals, fungi, and bacteria.

Reductionism

The approach of analyzing complex phenomena by breaking them down into their simpler components.

Integrative Perspective

An approach that combines various theoretical orientations or methodologies to provide a more comprehensive understanding or solution.

Biological Processes

The vital processes occurring in living organisms that are necessary for the maintenance of life, including growth, reproduction, and metabolism.