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

question 35

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 4,520,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:

Actual Outcome

The real result or end-product of a process, as opposed to the expected or theoretical outcome.

Calories

A measure of energy in food, scientifically defined as the amount of energy needed to raise the temperature of 1 kilogram of water by 1 degree Celsius.

Marginal Utility

refers to the additional satisfaction or utility gained from consuming one more unit of a good or service.

Millionaires

Millionaires are individuals whose net worth or wealth is equal to or exceeds one million units of currency.