Exhibit 23-5
-If output was at the level corresponding to point E in Exhibit 23-5, then
A)income would increase.
B)aggregate output would decrease.
C)it would be in equilibrium.
D)the marginal propensity to consume would decrease.
E)spending would decrease.

Question

Exhibit 23-5 
-If output was at the level corresponding to point E in Exhibit 23-5, then
A)income would increase. 
B)aggregate output would decrease. 
C)it would be in equilibrium. 
D)the marginal propensity to consume would decrease. 
E)spending would decrease.

Quizplus · Accepted Answer

Point E is below the equilibrium level of output, which means output is less than what households and firms want to spend. This will lead to a decrease in aggregate output as firms will decrease their production to match the level of spending.

Exhibit 23-5 -If Output Was at the Level Corresponding to Point E