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:

Straight Line

A method of calculating depreciation or amortization by spreading the cost evenly over the useful life of an asset.

MACRS

Modified Accelerated Cost Recovery System; a method of depreciation for tax purposes in the United States.

Depreciated

A decrease in the value of an asset over time due to wear and tear, obsolescence, or market conditions, often used for tax purposes.

Cash Inflow

The total amount of money being transferred into a business, from operations, financing or investing activities, over a specific period of time.