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If Planned Aggregate Expenditure (PAE)in an Economy Equals 3,500

Question 4

Multiple Choice

If planned aggregate expenditure (PAE) in an economy equals 3,500 + 0.5Y and potential output (Y*) equals 8,000,then this economy has


A) an expansionary gap.
B) a recessionary gap.
C) no output gap.
D) an income-expenditure multiplier equal to 5.
E) an income-expenditure multiplier equal to 9.

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