Suppose business decision makers become more optimistic about the future and, as a result, increase their investment spending by 20 billion. If the economy's marginal propensity to consume is 0.75, the equilibrium level of aggregate real GDP will increase by:
a. 15 billion.
b. 20 billion.
c. 50 billion.
d. 80 billion.
Question 2
Which one of the following is the largest component of the money supply (M1) in the United States?
a. Checkable deposits.
b. Gold certificates.
c. Credit cards and traveler's checks.
d. Federal Reserve notes.
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