Refer to the accompanying figure. Based on the figure, if autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal:
A)1,200.
B)400.
C)600.
D)800.

Question

Refer to the accompanying figure.  Based on the figure, if autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal:
A)1,200. 
B)400. 
C)600. 
D)800.

Quizplus · Accepted Answer

Autonomous spending is the vertical intercept of PAE. As the curve shifts downward from an intercept of 400 to 200, equilibrium output falls from 800 to 400.

Refer to the Accompanying Figure