-The above graph represents a closed private-sector economy. Which of the following statements is false?
A) Autonomous expenditures equal $150 and equilibrium Y is 300.
B) MPS is 0.5.
C) The slope of the AE line cannot be found from the graph.
D) MPC is constant at 0.5.

Question

-The above graph represents a closed private-sector economy. Which of the following statements is false?
A) Autonomous expenditures equal $150 and equilibrium Y is 300. 
B) MPS is 0.5. 
C) The slope of the AE line cannot be found from the graph. 
D) MPC is constant at 0.5.

Quizplus · Accepted Answer

The slope of the AE (Aggregate Expenditure) line represents the marginal propensity to consume (MPC), which can be determined from the graph if the changes in income and corresponding changes in consumption are known. Since MPC and MPS (marginal propensity to save) are related and can be derived from each other (MPC + MPS = 1), the statement that the slope of the AE line cannot be found is false if information on MPC or MPS is provided or can be inferred.

-The Above Graph Represents a Closed Private-Sector Economy