Figure 8.8

Alt text for Figure 8.8: In figure 8.8, a graph depicting potential GDP.
Long description for Figure 8.8: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars)with values GDP1 and GDP2 marked.The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line AE1, begins a little less than half way on 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, 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 intersects line AE2 at point K, half way along both lines, and intersects 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 plotted close to the right end of line AE2, to the right of point K.Point K is connected to its x-coordinate, GDP1, with a dotted line.A straight line, representing potential GDP, is drawn connecting points N and L with their x-coordinate, GDP2, such that it is parallel to line connecting point K with value GDP1.
-Refer to Figure 8.8.Potential GDP equals $500 billion.The economy is currently producing GDP₁, which is equal to $450 billion.If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?
A)-$40 billion
B)-$10 billion
C)$10 billion
D)$40 billion
E)$50 billion

The Decrease in Consumer Spending During the 2008-2009 Recession Was

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