The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

question 4

Multiple Choice

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc) = 0.80
∙ net tax rate (t) = 0.15
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars. FIGURE 22-3
-Refer to Figure 22-3.Which of the following equations describes the aggregate expenditure function for this economy?

• A)AE = 1000 + (0.68)Y
• B)AE = 1000 + (0.80)
• C)AE = 1000 +(0.80)Y + 0.15 Y_D
• D)AE = 1975 + (0.68)Y
• E)AE = 1975 +(0.65)Y