Refer to the information provided in Figure 8.11 below to answer the questions that follow. Figure 8.11
-Refer to Figure 8.11. A $20 million decrease in autonomous consumption
A) changes equilibrium expenditure to $120 million.
B) changes equilibrium output to $180 million.
C) will change the MPC.
D) will change the MPS.

Question

Refer to the information provided in Figure 8.11 below to answer the questions that follow.  Figure 8.11
-Refer to Figure 8.11. A $20 million decrease in autonomous consumption
A) changes equilibrium expenditure to $120 million. 
B) changes equilibrium output to $180 million. 
C) will change the MPC. 
D) will change the MPS.

Quizplus · Accepted Answer

A decrease in autonomous consumption would shift the consumption function downward, causing a decrease in equilibrium expenditure. In this case, equilibrium expenditure would decrease from $140 million to $120 million. The equilibrium output would also decrease, but that wasn't an option. The MPC and MPS may also change, but the question only asks about the impact on equilibrium expenditure.

Refer to the Information Provided in Figure 8