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If Planned Aggregate Spending in an Economy Can Be Written

Question 3

Multiple Choice

If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y − 20,000r, and potential output equals 36,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?


A) 2 percent
B) 3 percent
C) 4 percent
D) 5 percent

Correct Answer:

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