Figure 87 Alt Text for Figure 8

question 230

Multiple Choice

Figure 8.7 Alt text for Figure 8.7: In figure 8.7, a graph comparing real GDP and real aggregate expenditure.
Long description for Figure 8.7: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars) .The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars) .Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2, is to the right of AE1 and is on a similar path as line AE1, sloping up to the top right corner.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE2 at point K, half way along both the lines, and meets line AE1 at point N, plotted close to the right end of line AE1.Point J is plotted a little less than half way along line AE2, to the left of point K.Point L is marked close to the right end of line AE2, to the right of point K.
-Refer to Figure 8.7.Suppose that government spending increases, shifting up the aggregate expenditure line.GDP increases from GDP₁ to GDP₂, and this amount is $200 billion.If the MPC is 0.8, then what is the distance between N and L, or by how much did government spending change?

• A)$16 billion
• B)$40 billion
• C)$160 billion
• D)$200 billion
• E)$1,000 billion

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Definitions:

Price-Fixing

An illegal agreement among competitors to fix prices, set output levels, or divide markets, aimed at increasing profits by reducing competition.

Product Design

The process of creating a new product to be sold by a business to its customers, encompassing concept, development, and manufacturing stages.

Regulation

Rules or directives made and maintained by an authority to regulate behavior, usually in the form of laws or regulations.

High Profits

Significant financial gains exceeding the average or expected profit margins in a business's operations.