Equations for C, I, G, and NX Are Given Below

question 215

Multiple Choice

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,000? C = 5,000 + (MPC) Y
I = 1,500
G = 2,000
NX = -500

• A)$32,500
• B)$34,000
• C)$38,000
• D)$42,000
• E)Not enough information is given to answer the question.

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Definitions:

Required Return

The minimum expected return an investor demands for holding a particularly risky investment.

Plowback Ratio

The percentage of profits a company keeps instead of paying out to shareholders in the form of dividends.

Risk-Free Rate

This refers to the theoretical rate of return of an investment with no risk of financial loss, typically represented by government bonds.

Intrinsic Value

The fundamental, true value of an asset based on its characteristics and cash flow, independent of its current market price.