Question
Assume that equilibrium GDP (
Y
) is 5,000. Consumption (
C
) is given by the equation
C
= 500 + 0.6(
Y
–
T
). Taxes (
T
are equal to 1,000. Government spending is 600. In this case, equilibrium investment is:
)
Answer
600.
1,100.
1,500.
2,200.
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Multiple Choice
1 points
Question
Assume that equilibrium GDP (
Y
) is 5,000. Consumption (
C
) is given by the equation
C
= 500 + 0.6
Y
. Investment (
I
) is
given by the equation
I
= 2,000 – 100
r
, where
r
is the real interest rate in percent. No government exists. In this case,
the equilibrium real interest rate is:

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Multiple Choice
1 points
Question
Assume that equilibrium GDP (
Y
) is 5,000. Consumption (
C
) is given by the equation
C
= 500 + 0.6(
Y
–
T
). Taxes (
T
are equal to 600. Government spending is equal to 1,000. Investment is given by the equation
I
= 2,160 – 100
r
, where
)
r
18 of 35
12/8/2012 11:34
uni0645

is the real interest rate in percent. In this case, the equilibrium real interest rate is:

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Multiple Choice
1 points
Question
According to the model developed in Chapter 3, when government spending increases without a change in taxes:

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Question
According to the model developed in Chapter 3, when taxes decrease without a change in government spending:
Answer
consumption and investment both increase.
consumption and investment both decrease.
consumption increases and investment decreases.
consumption decreases and investment increases.

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Question
According to the model developed in Chapter 3, when government spending increases and taxes increase by an equal
amount:

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Question
According to the model developed in Chapter 3, when government spending increases but taxes are not raised,
interest rates:

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Question
According to the model developed in Chapter 3, when taxes are increased but government spending is unchanged,
interest rates:

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1 points