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. Suppose that instead of there being a recessionary gap, the economy is characterized by an equilibrium real GDP level of $900 that exceeds the natural unemployment or potential real GDP level by $600. This so-called expansionary gap can be closed by:
A) increasing planned aggregate expenditures by $400.
B) lowering government purchases by $600.
C) lowering autonomous consumption spending by $400.
D) increasing planned aggregate expenditures by $900.
E) lowering autonomous net exports by $600.
Correct Answer:
Verified
Correct Answer:
Verified
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