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) = 0.80
• 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