Author Question: If the annual inflation rate in an economy is i, then 1 borrowed at the beginning of a year will ... (Read 60 times)

swpotter12 · **on:** Jun 30, 2018

If the annual inflation rate in an economy is i, then 1 borrowed at the beginning of a year will have the same purchasing power as ________ dollars at the end of the year.

A) (1 - i) B) (1/i) C) (1 + i) D) i

Question 2

Suppose that real GDP is initially 14 trillion and the government attempts to increase real GDP to 15 trillion. The marginal propensity to consume is 0.8, and every 1.00 increase in real government spending crowds out 0.

50 in real planned investment expenditures. Which increase in government spending below could yield the desired level of real GDP?
A) 200 billion B) 125 billion C) 100 billion D) 400 billion