The Figure Given Below Depicts Macroeconomic Equilibrium in a Closed

question 89

Multiple Choice

The figure given below depicts macroeconomic equilibrium in a closed economy.Assume that the spending multiplier in this economy is 1.5. Figure 10.5 Refer to Figure 10.5.Assume that there is a recessionary gap that can be closed by a $500 increase in planned aggregate expenditures.If the economy is initially in equilibrium with a real GDP level of $900, then the target or potential level of real GDP must be:

• A)$333.33.
• B)$400.
• C)$750.
• D)$1, 400.
• E)$1, 650.

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Definitions:

Reasoning

The mental process of deriving conclusions, judgments, or inferences from facts or premises, often involving logical thought.

Feeling

An emotional state or reaction to stimuli, often subjective and not always based on fact.

Behaving

Acting in a manner according to certain standards, rules, or expectations in social contexts.

Heteronomous Morality

The first stage of moral development in Piaget’s theory, occurring from 4 to 7 years of age. Justice and rules are conceived of as unchangeable properties of the world, beyond the control of people.