Comparing Economic Behavior via Aggregate Demand Functions
An economist is studying two different economies, A and B. The total planned spending (aggregate demand, AD) for each, as a function of income (Y), is described by the following equations:
- Economy A: AD = 100 + 0.8Y + 200
- Economy B: AD = 150 + 0.6Y + 200
Based solely on these equations, which economy will experience a larger increase in total planned spending if national income in both economies increases by the same amount? Justify your answer by referencing the specific numerical component in the equations that determines this responsiveness.
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