Exhibit 12-2
-In an economy characterized by the aggregate expenditure line in Exhibit 12-2, what would the equilibrium real GDP be equal to if autonomous net taxes increased by $100?
A)$400
B)$500
C)$600
D)$700
E)$800

Question

Exhibit 12-2 
-In an economy characterized by the aggregate expenditure line in Exhibit 12-2, what would the equilibrium real GDP be equal to if autonomous net taxes increased by $100?
A)$400 
B)$500 
C)$600 
D)$700 
E)$800

Quizplus · Accepted Answer

An increase in autonomous net taxes would shift the aggregate spending line downward. The new equilibrium point will be where the new aggregate spending line intersects the 45-degree line. The new intersection point is around the $500 level of real GDP. Therefore, the equilibrium real GDP would be equal to $500.

Exhibit 12-2 -In an Economy Characterized by the Aggregate Expenditure Line in Expenditure