The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

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) = 0.75
• net tax rate (t) = 0.20
• no foreign trade
• fixed price level
• all expenditure and income figures are in billions of dollars. FIGURE 22-2
Refer to Figure 22-2.Which of the following equations describes the aggregate expenditure function for this economy?

A) AE = 250 + (0.6) Y
B) AE = 225 + (0.75) Y
C) AE = 250 +(0.15) Y
D) AE = 75 + (0.75) Y + (0.2) Y_D
E) AE = 250 +(0.75) Y + (0.2) Y_D