FIGURE 22-4
-Refer to Figure 22-4. The rotation from AE1 to AE0 could be caused by
A) an increase in the marginal propensity to consume out of disposable income.
B) a decrease in the marginal propensity to import.
C) an increase in the marginal propensity to import.
D) a decrease in the net tax rate.
E) a decrease in government purchases.

Question

FIGURE 22-4
-Refer to Figure 22-4. The rotation from AE1 to AE0 could be caused by
A) an increase in the marginal propensity to consume out of disposable income. 
B) a decrease in the marginal propensity to import. 
C) an increase in the marginal propensity to import. 
D) a decrease in the net tax rate. 
E) a decrease in government purchases.

Quizplus · Accepted Answer

The rotation from AE1 to AE0 indicates a decrease in aggregate demand, which could be caused by an increase in the marginal propensity to import, meaning that a larger portion of income is being spent on imported goods, reducing domestic demand.

FIGURE 22-4 -Refer to Figure 22-4. the Rotation from AE1 to AE0