For questions 14 to 16, consider an economy with C = $5000 + 0.6YD, I = $1000, G = $800, T = $1000, NX = -$200, where the dollar amounts are in millions of dollars.
14. For the economy described, equilibrium income (in millions) is:
A. $12,000
B. $15,000
C. $16,500
D. $19,000
E. None of the above
15. If, in the economy described, government spending increases by $200 million, what will be the associated change in equilibrium income (in millions)?
A. $200
B. $500
C. $333
D. $400
E. None of the above
16. If, in the economy described, both government spending and taxes are raised by $200 million, what will be the change in equilibrium income (in millions)?
A. $200
B. $100
C. $0
D. $-200
E. None of the above
17. If an economy is operating at full employment:
A. the AS curve is vertical.
B. the AS curve is upward sloping, but not wholly vertical.
C. the AS curve is horizontal.
D. an increase in autonomous expenditure will lead to no increase in equilibrium output.
E. an increase of $1,000 in government spending with a Keynesian multiplier of 4.0 will increase equilibrium income $4,000.
