Consider the Consumption Function $C _ { t } / \bar { Y } _ { t } = \bar { a } _ { c } + \bar { x } \tilde { Y } _ { t }$

question 62

Multiple Choice

Consider the consumption function $C _ { t } / \bar { Y } _ { t } = \bar { a } _ { c } + \bar { x } \tilde { Y } _ { t }$ . If $\bar { x } = 0.5$
, a 2 percent demand shock:

• A) raises short-run output by 1 percent
• B) raises short-run output by 0.5 percent
• C) raises short-run output by 4 percent
• D) reduces short-run output by 4 percent
• E) has no impact on short-run output