Quiz: Chapter 16 Appendix E Quiz This Question: 1 pt Submit Quiz 3 of 4 (1 compl

Question

Quiz: Chapter 16 Appendix E Quiz This Question: 1 pt Submit Quiz 3 of 4 (1 complete) This Quiz: 4 pts possible 923 62 est Suppose that each 0.1 percentage point decrease in the equilibrium interest rate induces a $10 billion increase in real planned investment spending by businesses. In addition, the autonomous spending mutiplier is 2 and the money multiplier is equal to 4. Furthermore, every $20 billion increase in the money supply brings about a 0.1 percentage point reduction in the equilibrium interest rate. 91.6 How much must real planned investment increase if the Fed desires to bring about a $100 billion increase in real GDP? bilion. (Round your answer to a whole number) What dollar amount of open market operations must the Fed undertake to bring about the money supply change necessary to bring about a $100 billion increase in real GDP? S billion. (Round your answer to a whole number Enter your answer in each of the answer boxes

Explanation / Answer

1.

Increase in real planned investment = increase in real GDP/spending multiplier = 100/2

Increase in real planned investment = $50 billion

2.

Change in money supply = increase in real GDP/money multiplier = 100/4

Change in money supply = $25 billion

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