The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

question 16

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) = 0.80
• net tax rate (t) = 0.15
• no foreign trade
• fixed price level
• all expenditure and income figures are in billions of dollars. FIGURE 22-3
Refer to Figure 22-3.Which of the following equations describes the aggregate expenditure function for this economy?

• A)AE = 1000 + (0.68)Y
• B)AE = 1000 + (0.80)
• C)AE = 1000 + (0.80)Y + 0.15 Y_D
• D)AE = 1975 + (0.68)Y
• E)AE = 1975 + (0.65)Y

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