Refer to the accompanying figure. Based on the figure, and starting from an initial short-run equilibrium where output equals 20,000, if autonomous consumption spending decreases by 1,000, then the new short-run equilibrium output (Y )is equal to:
A)24,000.
B)16,000.
C)14,000.
D)22,000.

Question

Refer to the accompanying figure.  Based on the figure, and starting from an initial short-run equilibrium where output equals 20,000, if autonomous consumption spending decreases by 1,000, then the new short-run equilibrium output (Y )is equal to:
A)24,000. 
B)16,000. 
C)14,000. 
D)22,000.

Quizplus · Accepted Answer

Short-run equilibrium output (Y )occurs where the PAE line intersects the 45-degree line, which is 16,000 for the PAE line 4,000 + 0.75Y.

Refer to the Accompanying Figure