Use the following to answer question6 Table: Aggregale Speeding Real GDP 100 s00

Question

Use the following to answer question6 Table: Aggregale Speeding Real GDP 100 s00 1,000 600 1,000 1,500 2,500 3,500 900 1,500 1,300 2,000 1,700 2,500 2,100 ,0002.500 1,500 2.900 600 600 600 600 6. (Table: Aggregate Spending) Look at the table Aggregate Spending Suppose the economy has no government spending and no foeign trade. With no taxes or transfers real GDP equals disposable income (7D) Ar what level of real GDP will the economy find its income expenditure equilsbeium A) $2,000 B) $2,500 C) $3,500 D) $4,500 7. A S50 million increase in investment spending will eventually cause equailbim real GDP to A) decrease by $50 million B) increase by $50 miltion increase by more than $50 miltion D) increase by less than $50 million s Whenever real GDP esceeds planned aggregate spendting A) finms reduce production, reducing real GDP B) households increase C) fims increase production, increasing mal GDIP D) households decrease cossumption, decressing disosable income B) increase in the discount rate C) decrease in the money supply Di purchases of govemment securities in the open market

Explanation / Answer

6) The answer is C = ) $3500

because at this level of real GDP = $3500 is equal to Aggregate expenditure = $3500

7) The answer is C -) increases by more than $50 million.

because a $50 million increase in investment spending will increase the money supply by the amount of investment and the multiplier.thus is will increase by more than $50 million.

8) The asnwer is A -) firms reduce production , reducing real GDP.

9) The answer is D -) Purchase of government securities in open market operations.

because by purchasing, the money supply increases. and economy moves out from recession.

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