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

question 114

Multiple Choice

If planned aggregate expenditure (PAE) in an economy equals 2,000 + 0.5Y and potential output (Y*) equals 4,400,government purchases must ________ to eliminate any output gap.

• A) increase by 20
• B) increase by 200
• C) increase by 250
• D) decrease by 200
• E) decrease by 250

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