Refer to the accompanying figure. Based on the figure, if autonomous spending increases from 400 to 600, 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 increases from 400 to 600, 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 upward from an intercept of 400 to 600, equilibrium output rises from 800 to 1,200.

Refer to the Accompanying Figure