Homework: Chapter 16 Appendix E Homework Score: 0 of 1 pt Text Problem E-2 1 of
ID: 1116524 • Letter: H
Question
Homework: Chapter 16 Appendix E Homework Score: 0 of 1 pt Text Problem E-2 1 of 2 (0 complete) | HW Score: 0%, 0 of 2 pts Question Help * Suppose that each 0.1-percentage-point increase in the equilibrium interest rate induces a $3 billion decrease in real planned investment spending by businesses. In addition, the investment multiplier is equal to 5, and the money multiplier is equal to 3. Furthermore, every $10 billion decrease in the money supply brings about a 0.1-percentage-point increase in the equilibrium interest rate. Use this information to answer the following questions under the assumption that all other things are equal Calculate by how much the real planned investment must decrease if the Federal Reserve desires to bring about an $60 billion decrease in equilibrium real GDP $ bition (Enter your response rounded to one decimal piace ) Enter your answer in the answer box and then click Check Answer a partsExplanation / Answer
Change in equillibrium real GDP = - $60 bn
Change in planned investment (Decrease) = y
y x investment multiplier = change in equilibrium real GDP = 60
y = 60/5 = $12 bn
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