The Figure Given Below Depicts the Macroeconomic Equilibrium in a Country

question 60

Multiple Choice

The figure given below depicts the macroeconomic equilibrium in a country.
Figure 11.3

-Refer to Figure 11.3. Assume that the increase in aggregate demand from AD₁ to AD₂ was the result of government spending that was financed by borrowing. Assuming that the Ricardian equivalence holds and people expect taxes to rise in future, the equilibrium income will be:

• A) $800.
• B) less than $500.
• C) more than $800.
• D) less than $700.
• E) $700.