Refer to the table for Moola given below to answer the following questions. What

Question

Refer to the table for Moola given below to answer the following questions. What is the equilibrium interest rate in Moola? What is the level of investment at the equilibrium interest rate? Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate and. if either, what is the amount? Given money demand, by how much would the Moola central bank need to change the money supply to close the output gap? What is the (expenditure) multiplier in Moola?

Explanation / Answer

a. 5%

b. $20

c. There is a of $20

d. The money supply by $100

e. The expenditures multiplier measures the change in aggregate productiontriggered by changes an autonomous expenditure, including consumption expenditures, investment expenditures, government purchases, or net exports. The expenditures multiplier captures the consequences of a shift in the aggregate expenditures line in a single measure, a measure that is generally greater than one.

The expenditures multiplier is actually a family of multipliers that differ based on which components of the Keynesian model are assumed to be induced by aggregate production and income. The simple expenditures multiplier, as the name suggestions, is the simplest variation and includes only induced consumption. Every other component -- investment expenditures, government purchases, taxes, exports, and imports -- are assumed to be autonomous.

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