The diagram below shows desired aggregate expenditure for a hypothetical economy. Assume the following features of this economy:
· marginal propensity to consume mpc) = 0.80
· net tax rate t) = 0.15
· no foreign trade
· fixed price level
· all expenditure and income figures are in billions of dollars.
FIGURE 22-3
-Refer to Figure 22-3. Which of the following equations describes the aggregate expenditure function for this economy?

Question

The diagram below shows desired aggregate expenditure for a hypothetical economy. Assume the following features of this economy:
· marginal propensity to consume mpc) = 0.80
· net tax rate t) = 0.15
· no foreign trade
· fixed price level
· all expenditure and income figures are in billions of dollars.
  FIGURE 22-3
-Refer to Figure 22-3. Which of the following equations describes the aggregate expenditure function for this economy?

Quizplus · Accepted Answer

The aggregate expenditure function typically includes autonomous spending and a marginal propensity to consume (MPC) multiplied by income (Y). The equation AE = 1000 + 0.68Y fits this form, with 1000 as autonomous spending and 0.68 as the MPC.

The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical