Answer Happy

Choose the right answer: M1 = 2000 MP= 2100 – 4000r + (G-T) I = 300 – 3000r C = 200 +.9Yd T= 100 G= 160 deficit] X= 130 M= 150 [G - T is the government deficit, or fiscal 1. The government deficit, or fiscal deficit, is... a) 0 b) 60 c) 100 2. The equilibrium interest rate, r, is... a) .05 b).04
c) .025 3. The equilibrium Investment, I, is... a) 150 b) 200 c) 180 4. The equilibrium GDP, Y, is... a) 4300 b) 4400 c) 4000 5. Breakeven Consumption, C, is... a) 4070 b) 3710 c) 3980 6. Breakeven Personal Savings, A, is... a) 230 b) 220 c) 190 NOW SUPPOSE that the President and Congress decide to use fiscal policy to stimulate the economy and increase government spending, to 200. 7. The new fiscal deficit is... a) 0 b) 60 c) 100
8. The new equilibrium interest rate, r, is... a).05 b).04 c).025 9. The new equilibrium value of Investment, I, is... a) 150 b) 200 c) 180 10. The new equilibrium GDP, Y, is... a) 4300 b) 4400 c) 4000 11. The new equilibrium Consumption, C, is... a) 4070 b) 3710 c) 3980 12. The new breakeven Personal Savings, A, is... a) 230 b) 220 c) 190
13. The expansionary fiscal policy action of raising G to 200... a). caused a displacement effect, since the Investment was reduced b). did not cause a displacement effect, since the interest rate, r, increased c). did not cause a displacement effect, since the interest rate, r, was reduced 14. The expansionary fiscal policy action in this example... a). Caused all variables in the model to increase b). It caused all the variables of the model to increase except Personal savings, A c). It caused all the variables of the model to increase except Investment, I 15. The expansionary fiscal policy action in this example... a). It did not achieve its purpose because the Investment was reduced, I b). It did not achieve its purpose because it increased the interest rate, r c). It achieved its purpose because it increased GDP, AND.