You Are Given the Following Information About the Canadian Economy

question 68

Multiple Choice

You are given the following information about the Canadian economy. Autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Net taxes are assumed to be constant and not vary with income. Exports are $500 billion and imports are $450 billion. The equation of the AE curve in billions of dollars is ________. Equilibrium expenditure is ________.

• A)AE = 0.7 + 375Y; $1,250 billion
• B)AE = 0.7Y + 300; $1,000 billion
• C)AE = 0.7Y + 1,275; $4,250 billion
• D)AE = 0.7Y + 375; $1,250 billion
• E)AE = 0.7Y + 375; $536 billion

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Definitions:

Investee Earnings

Represents the portion of profits or losses from investments in other entities that the investing company includes in its own financial statements.

Voting Common Stock

A type of equity security that grants its holders the right to vote on corporate policies and the election of the board of directors.

Consolidation Accounting

A method of accounting in which the financial statements of a parent company and its subsidiaries are combined to present a single economic entity.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote and share in profits through dividends.