In Econland,the Components of Planned Aggregate Expenditure Are Given By

question 95

Multiple Choice

In Econland,the components of planned aggregate expenditure are given by:
C = 500 + 0.75(Y - T) - 500r
I = 300 - 500r
G = 400
NX = 30
If potential output equals 4,680,net taxes equal 40 and the central bank sets the interest rate at 0.05 (5%) ,then the bank must _______ the interest rate to ________ to restore full employment.

• A) raise;6%
• B) raise;7%
• C) lower;4%
• D) lower;3%
• E) lower;2%

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Definitions:

Pons

A part of the brainstem that plays a key role in controlling breathing, communication between different parts of the brain, and sensations such as hearing.

Regulates Thirst

The physiological process that maintains hydration in the body by triggering the sensation of thirst.

Limbic System

A complex system of nerves and networks in the brain, involved in basic emotions (such as fear and pleasure) and drives (such as those for food and sex).

Medulla

The base of the brainstem, controlling vital life-sustaining functions such as heartbeat, breathing, blood pressure, and digestion.