If Planned Aggregate Expenditure (PAE )In an Economy Equals 2,000

question 40

Multiple Choice

If planned aggregate expenditure (PAE ) in an economy equals 2,000 + 0.8Y and potential output (Y*) equals 11,000, then this economy has:

• A)an expansionary gap.
• B)a recessionary gap.
• C)no output gap.
• D)no autonomous expenditure.

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Definitions:

Long-Term Investment

Assets purchased for the purpose of holding them for an extended period, often years, such as stocks, bonds, or real estate.

Bonds

Long-term instruments of debt issued by corporations or governments, promising to pay back the principal along with interest at a future date.

Equity Securities

Financial instruments that represent an ownership interest in a company, such as stocks.

Money-Market Funds

Investment funds that invest in short-term debt securities with the goal of providing high liquidity and low risk.