Refer to Figure 10.1 for the Following Questions

question 7

Multiple Choice

Refer to Figure 10.1 for the following questions.
Figure 10.1

-Suppose the economy is at point A in Figure 10.1. If consumer spending increases in the economy, where will the eventual long-run equilibrium be?

• A)A
• B)B
• C)C

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Definitions:

APS

Assumes "APS" refers to "Average Propensity to Save," which is the proportion of total income or output that is saved rather than spent on consumption.

Induced Consumption

Refers to the portion of consumer spending that increases or decreases in response to changes in income.

Disposable Income

The pot of funds households have at their disposal for saving and spending, post-income tax.

MPC

refers to the Marginal Propensity to Consume, which is the fraction of additional income that a household spends on consumption.