Assume that the MPS is .25 in an economy that has an aggregate supply curve with a slope of 1. Also, suppose that the price level is flexible downward. A decrease in investment spending of $10 billion will shift the aggregate demand curve leftward by

$40 billion and decrease real GDP by $30 billion.

$40 billion and decrease real GDP by $20 billion.

$30 billion and decrease real GDP by $15 billion.

$50 billion and decrease real GDP by $25 billion.

Transcribed Image Text:

(Floating-rate loans) The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 28 basis points (0.28 percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.24 percent and a minimum of 1.79 percent. Calculate the rate of interest for weeks 2 through 10. Date Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 LIBOR 1.94% 1.69% 1.52% 1.37% 1.56% 1.62% 1.75% 1.89% 1.87% (Floating-rate loans) The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 28 basis points (0.28 percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.24 percent and a minimum of 1.79 percent. Calculate the rate of interest for weeks 2 through 10. Date Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 LIBOR 1.94% 1.69% 1.52% 1.37% 1.56% 1.62% 1.75% 1.89% 1.87%

Answer rating: 100% (QA)

Answer A option is the correct option 40 billion and decrease real GDP by ... View the full answer