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) YD
E) AE = 250 +0.75) Y + 0.2) YD