**Unformatted text preview: **ncome will net exports equal zero? A) $0 B) $200 C) $250 D) $1000 E) $1250 15) Suppose aggregate output is demand -determined. If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending, then equilibrium income will ________ and the marginal propensity to spend must equal ________. A) decrease by $40 billion; 0.75 B) decrease by $10 billion; 0.25 C) increase by $40 billion; 0.25 D) increase by $40 billion; 0.75 E) none of the above 16) Suppose that in 2007 Canadas automobile manufacturers produced 2 million cars priced at $20 000 each. And in 2008 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in nominal national income is A) a decrease because fewer cars were produced. B) an increase because the price of each car increased. C) insufficient information to know. D) no change in nominal national income. 17) Suppose the Bank of Montreal wants a four percent real rate of return on all its loans, and anticipates an annual inflation rate of six percent. It should therefore lend its m...

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