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The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical

Question 106

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. 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 correctly describes the consumption function for this economy? A) C = (0.6) Y<sub>D</sub> B) Y = 250 + (0.75) Y<sub>D</sub> C) C = 75 + (0.75) Y<sub>D</sub> D) Y = 250 + (0.75) Y E) C = 250 + (0.6) Y FIGURE 22-2
-Refer to Figure 22-2.Which of the following correctly describes the consumption function for this economy?


A) C = (0.6) YD
B) Y = 250 + (0.75) YD
C) C = 75 + (0.75) YD
D) Y = 250 + (0.75) Y
E) C = 250 + (0.6) Y

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