Suppose an economy is at full-employment equilibrium at a GDP of $25 billion and investment declines...

 

Transcribed Image Text:

Suppose an economy is at full-employment equilibrium at a GDP of $25 billion and investment declines by $4 billion. According to Keynes, this economy will: OA. Quickly self adjust back to full employment. OB. Reach a new equilibrium at $21 billion. OC. Eventually reach a new equilibrium at an output level significantly less than $21 billion. OD. Reach a new equilibrium at a level of output between $21 billion and $25 billion. Suppose an economy is at full-employment equilibrium at a GDP of $25 billion and investment declines by $4 billion. According to Keynes, this economy will: OA. Quickly self adjust back to full employment. OB. Reach a new equilibrium at $21 billion. OC. Eventually reach a new equilibrium at an output level significantly less than $21 billion. OD. Reach a new equilibrium at a level of output between $21 billion and $25 billion.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below According ... View the full answer