In the Simple Keynesian Model with No Government and Foreign

question 241

Multiple Choice

In the simple Keynesian model with no government and foreign sectors,assume that the economy is in equilibrium at an output of $2 billion with a marginal propensity to consume of 0.9.If investment spending decreases by $0.05 billion,what is the new equilibrium output level?

• A) $1.95 billion
• B) $2.5 billion
• C) $1.9 billion
• D) $1.5 billion

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Definitions:

Medial Epicondyle

A bony protrusion on the inner side of the humerus where certain tendons of the forearm muscles attach.

Glenohumeral Joint

The ball-and-socket joint of the shoulder, allowing for a wide range of arm movements.

Circumduction

A circular movement of a limb or eye that combines flexion, extension, abduction, and adduction in a sequential manner.

Flexion and Extension

Movements that decrease (flexion) or increase (extension) the angle between the bones of a joint.