A multiplier of 10 means that a $100 billion increase in investment will
A. increase equilibrium real GDP by $100 billion.
B. decrease equilibrium real GDP by $1000 billion.
C. increase equilibrium real GDP by $10 billion.
D. increase equilibrium real GDP by $1000 billion.
D. increase equilibrium real GDP by $1000 billion.
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Monetarists' preference for reduced-form models is based on their belief that
A) reverse causation is a problem. B) structural models may understate money's effect on economic activity. C) money supply changes are always endogenous. D) monetary policy affects only investment spending.
Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:
a. economy A will operate inefficiently. b. economy B will operate inefficiently. c. economy A and economy B will grow equally fast. d. economy A will grow faster than economy B. e. economy B will grow faster than economy A.