Scenario 10.1 Imagine an Economy That Does Not Have International Trade and Trade

Scenario 10.1
Imagine an economy that does not have international trade and is originally in equilibrium. Then the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved.
-Refer to Scenario 10.1. The new equilibrium level of GDP for the economy will be:

A) one billion higher.
B) 350 millions higher.
C) 65 millions higher.
D) 227.5 millions higher.
E) 227.5 millions lower.

Correct Answer:

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