The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

question 6

Multiple Choice

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: • marginal propensity to consume (mpc) = 0.75
• net tax rate (t) = 0.20
• no foreign trade
• fixed price level
• all expenditure and income figures are in billions of dollars. FIGURE 22-2
Refer to Figure 22-2.Which of the following equations describes the aggregate expenditure function for this economy?

• A)AE = 250 + (0.6)Y
• B)AE = 225 + (0.75)Y
• C)AE = 250 +(0.15)Y
• D)AE = 75 + (0.75)Y + (0.2)Y_D
• E)AE = 250 +(0.75)Y + (0.2)Y_D

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after subtracting liabilities, representing the ownership stake of shareholders.

Investment Account

An account held at a financial institution that holds securities, cash, and other investments, used for the purpose of long-term or short-term investing.

Carrying Value

The amount at which an asset is recognized on the balance sheet after deducting accumulated depreciation and impairment losses.

Inventory

Goods and materials that a business holds for the ultimate goal of resale.