Use the table below to answer the following questions.
Table 27.3.1
The following table shows the relationship between aggregate planned
expenditure and real GDP in the hypothetical economy of Econoworld.

-Refer to Table 27.3.1. If investment increases by $25 billion, the real GDP becomes
A)$525 billion.
B)$625 billion.
C)$725 billion.
D)$600 billion.
E)$675 billion.

Question

Use the table below to answer the following questions.
Table 27.3.1
The following table shows the relationship between aggregate planned
expenditure and real GDP in the hypothetical economy of Econoworld.
 
-Refer to Table 27.3.1. If investment increases by $25 billion, the real GDP becomes
A)$525 billion. 
B)$625 billion. 
C)$725 billion. 
D)$600 billion. 
E)$675 billion.

Quizplus · Accepted Answer

According to the table, when investment increases by $25 billion, aggregate planned expenditure (APE) increases by $75 billion ($25 billion investment multiplied by the expenditure multiplier of 3). With the given equation of Y = APE (where Y is real GDP), the new real GDP would be $625 billion ($550 billion initial GDP plus the $75 billion increase in APE). Therefore, the correct choice is B.

Use the Table Below to Answer the Following Questions