Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5
-Refer to Figure 9.5. If the economy is in equilibrium and the government decreases spending by $100 billion, equilibrium aggregate output decreases to $________ billion.

Question

Refer to the information provided in Figure 9.5 below to answer the questions that follow.  Figure 9.5
-Refer to Figure 9.5. If the economy is in equilibrium and the government decreases spending by $100 billion, equilibrium aggregate output decreases to $________ billion.

Quizplus · Accepted Answer

Based on the graph in Figure 9.5, a $100 billion decrease in government spending will shift the aggregate expenditure line down by $100 billion. The new intersection point between the aggregate expenditure line and the 45-degree line will be at an aggregate output level of $1,200 billion. Therefore, the answer is (C) 1,200.

Refer to the Information Provided in Figure 9