In an Economy in Which Planned Aggregate Expenditure Is Given

question 87

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 11,750,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:

Scatter Plot

A graphical representation using dots to show the relationship between two quantitative variables, with each axis representing one of the variables.

Y-intercept

The point where a line or curve crosses the y-axis of a graph, indicating the value of the dependent variable when all independent variables are zero.

Regression Equation

A statistical method for estimating the relationships among variables, often used for predicting the value of a dependent variable based on the values of one or more independent variables.

Linear Regression

A statistical method for modeling the relationship between a dependent variable and one or more independent variables using a linear equation.