Assume There Is No Government or Foreign Sector

question 71

Multiple Choice

Assume there is no government or foreign sector. If the multiplier is 2, a $20 billion increase in planned investment will cause aggregate output to increase by

• A) $5 billion.
• B) $10 billion.
• C) $20 billion.
• D) $40 billion.

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Definitions:

Central Banks

Institutions that manage the currency, money supply, and interest rates of a state or country.

Political Control

The influence or authority exerted by a government or political group over its citizens, economic system, or societal structures.

Inflation Rates

The percentage increase in the price level of goods and services over a period, reducing purchasing power.

Excess Reserves

Bank reserves that exceed the required minimum amount that financial institutions must hold in reserve against deposit liabilities.