The economy is in equilibrium, TP = TE, and Real GDP is $2,000 billion. The MPC...
The economy is in equilibrium, TP = TE, and Real GDP is $2,000 billion. The MPC is 0.75, the multiplier is operative, and idle resources exist at each expenditure round. Autonomous investment spending falls by $10 billion. As a result, the TE curve shifts __________, inventory levels unexpectedly __________, business firms __________ the quantity of goods and services they produce, and Real GDP __________ by __________.
| downward; rise; decrease; falls; $7.5 billion |
| downward; fall; increase; rises; $40 billion |
| downward; rise; decrease; falls; $40 billion |
| upward; rise; decrease; falls; $40 billion |
| downward; fall; decrease; falls; $7.5 billion |
Homework Answers
Autonomous investment spending falls by $10 billion . As a result, the TE curve shifts downward , inventory levels unexpectedly rises , business firms decrease the quantity of goods and services they produce , and Real GDP falls by (10/1-MPC) = (10/1-0.75) = 10/0.25 =$40 billion.
Hence, option(C) is correct.
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The economy is in equilibrium, TP = TE, and Real GDP is $2,000 billion. The MPC...
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