Refer to the information provided in Table 24.6 below to answer the question(s) that follow.
Table 24.6
All Figures in Billions of Dollars
-Refer to Table 24.6. The economy is at the equilibrium level of output. If government spending decreases by $100 billion, the new equilibrium level of output is

Question

Refer to the information provided in Table 24.6 below to answer the question(s) that follow.
Table 24.6
All Figures in Billions of Dollars 
-Refer to Table 24.6. The economy is at the equilibrium level of output. If government spending decreases by $100 billion, the new equilibrium level of output is

Quizplus · Accepted Answer

According to the table, at the equilibrium level of output, which is $2,500 billion, government spending is $500 billion. If government spending decreases by $100 billion, the new aggregate expenditure (AE) will be [C + I + G + (X-M)] - $100 billion. Therefore, the new equilibrium level of output can be found at the intersection between AE and the 45-degree line, which is $2,400 billion. So, the correct answer is B.

Refer to the Information Provided in Table 24