If Planned Aggregate Expenditure (PAE)in an Economy Equals 1,000

question 18

Multiple Choice

If planned aggregate expenditure (PAE) in an economy equals 1,000 + 0.5Y and potential output (Y*) equals 2,200,government purchases must ________ to eliminate any output gap.

• A) increase by 10
• B) increase by 100
• C) increase by 1,000
• D) decrease by 1,000
• E) decrease by 100

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