Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG = Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + IP + G and all components of aggregate expenditures except consumption are autonomous. The MPC is 0.6. If investment expenditures rise by $100 billion, the equilibrium level of real GDP of rises by
A) $250 billion.
B) $300 billion.
C) $500 billion.
D) $1,500 billion.
Correct Answer:
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