Suppose Households Save $40 Billion Less at Each Level of Income

question 71

Multiple Choice

Suppose households save $40 billion less at each level of income, and the MPC = 0.8.How will the aggregate expenditure line will be affected?  

• A) It will shift upward by $40 billion. 
• B) It will shift downward by $40 billion. 
• C) It will shift upward by $200 billion because of the multiplier. 
• D) It will shift downward by $200 billion because of the multiplier.

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