Homework Answers
Let the goods market equation be
Y = C+I
= 0.75Y + 100-5r
Initially r was 4.
Y = 0.75Y +100 - 5*4
0.25Y = 80
Y=320..
When r fell to 3,
Y= 0.75Y + 100 -5*3
0.25Y=85
Y=340.
Hence Y has to increase by 20.
The correct option is 20.
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