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

question 17

Multiple Choice

In Macroland,the components of planned aggregate expenditure are given by:
C = 100 + 0.9(Y - T) - 500r
I = 150 - 1,000r
G = 200
NX = 50
If potential output equals 3,200,net taxes equal 100,and the central bank sets the interest rate to equal 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:

Investing

Dispensing money with the anticipation of making an income or profit.

Interest Rate

The percentage charged on borrowed money or paid on invested capital, reflecting the cost of borrowing or the reward for investing.

Investing

The act of allocating resources, typically money, with the expectation of generating an income or profit.

Interest Rate

The amount charged by lenders to borrowers for the use of assets, expressed as a percentage of the principal, the rate can influence inflation and economic activity.