Assume that aggregate demand is $650 billion and that $280 billion of it is consumption spending and $210 billion is investment spending The Fed conducts an expansionary monetary policy and changes the interest rate from 7 % to 4 %. Assume that every 1 percentage point change in interest rate results in a 10 % change in consumption spending and a 20 % change in investment spending Other components of aggregate demand are the same at the initial and new equilibrium points. Determine the level of output that corresponds to the new equilibrium point given the expansionary monetary policy. Both consumption and investment spending change in the same direction. Round to the nearest whole number and enter your answer in billions in the box below.

Assume that aggregate demand is $650 billion and that $280 billion of it is consumption spending and $210 billion is investment spending The Fed conducts an expansionary monetary policy and changes the interest rate from 7 % to 4 %. Assume that every 1 percentage point change in interest rate results in a 10 % change in consumption spending and a 20 % change in investment spending Other components of aggregate demand are the same at the initial and new equilibrium points. Determine the level of output that corresponds to the new equilibrium point given the expansionary monetary policy. Both consumption and investment spending change in the same direction. Round to the nearest whole number and enter your answer in billions in the box below.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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