Refer to the information provided in Table 24.5 below to answer the question(s) that follow.
Table 24.5
All Numbers are in $ Million
-Refer to Table 24.5. Suppose the economy is in equilibrium and the government increases spending by $50 million, the new equilibrium output is $________ million

Question

Refer to the information provided in Table 24.5 below to answer the question(s) that follow.
Table 24.5
All Numbers are in $ Million 
-Refer to Table 24.5. Suppose the economy is in equilibrium and the government increases spending by $50 million, the new equilibrium output is $________ million

Quizplus · Accepted Answer

Equilibrium output is where Aggregate Demand (AD) is equal to Aggregate Supply (AS). In this table, we can see that when Real GDP(Y) is $1,500 million, AD and AS are equal at $1,500 million. 
If the government increases spending by $50 million, then AD will increase because government spending is a component of AD. The new AD would be:
AD = C + I + G + NX
AD = $800 + $300 + $400 + $100 + $50
AD = $1,650 million
Now we need to find the new equilibrium output where the new AD of $1,650 million intersects with the AS curve. We can see that the intersection point is at Y = $1,650 million, which is the new equilibrium output. Therefore, the answer is C) 1,650.

Refer to the Information Provided in Table 24