The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

question 96

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 correctly describes the consumption function for this economy?

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

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