In an Economy in Which Planned Aggregate Expenditure Is Given

question 104

Multiple Choice

In an economy in which planned aggregate expenditure is given by PAE = 5,500 + 0.6Y - 20,000r,the central bank is currently setting the interest rate at 0.05 (5%) .If potential output equals 10,750,the central bank must ________ the interest rate to ________ to restore full employment.

• A) lower;3%
• B) lower;4%
• C) raise;6%
• D) raise;7%
• E) raise;8%

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Definitions:

External Reporting

The preparation and disclosure of financial statements and other information to parties outside the corporation, typically involving public companies.

Long-Term Assets

Assets that are expected to provide economic benefits beyond one year, including property, plant, equipment, and intangible assets.

Employee Wages

Compensation paid to employees for their labor, including salaries, hourly wages, and commissions.

Operating Expenses

The costs associated with the normal operations of a business, such as salaries, rent, and utilities.