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Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points

Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Can I have easy explanations to these please. I do not understand.

Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points
Transcribed Image Text:Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points
Question 23 Hide Correct Answer Show Responses Suppose the potential output is 50 trillion and autonomous spending is 10 trillion. Compute the mpc.
Transcribed Image Text:Question 23 Hide Correct Answer Show Responses Suppose the potential output is 50 trillion and autonomous spending is 10 trillion. Compute the mpc.
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potential output level means that economy is producing at full capacity and beyond that production cannot be done with same resources and technology.

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