Refer to the information provided in Figure 19.1 below to answer the questions that follow. Figure 19.1
-Refer to Figure 19.1. If the economy is closed and the government increases spending by 25, the new equilibrium output is

Question

Refer to the information provided in Figure 19.1 below to answer the questions that follow.  Figure 19.1
-Refer to Figure 19.1. If the economy is closed and the government increases spending by 25, the new equilibrium output is

Quizplus · Accepted Answer

An increase in government spending will shift the aggregate expenditures curve upward, resulting in a new equilibrium output at the intersection of the aggregate expenditures curve and the 45-degree line. In this case, an increase in government spending by 25 will shift the aggregate expenditures curve from AE1 to AE2. The new equilibrium output is the point where AE2 intersects the 45-degree line, which is at 225. Therefore, the answer is C.

Refer to the Information Provided in Figure 19