By what value equilibrium output and aggregate demand will change, when the value of parameter c changes from 0.8 to 0.5 at a given $\bar A = 50$?

150

The correct answer is Option (3) → 150

$\bar A = 50$

Initial $c_1$=0.8

New $c_2$=0.5

Formula for equilibrium output: Y = $\bar A = 50$/ ( 1- c)

$Initial\; equilibrium\; output\; (\$Y\_1\$)=50\; /\; (1\; -\; 0.8)\; =\; 50\; /\; 0.2\; =\; 250$

New equilibrium output ($Y_2$) =50 / (1 - 0.5) = 50 / 0.5 = 100

Change in equilibrium output (ΔY) =Y2​−Y1​ = 100−250 =−150

This means equilibrium output decreases by 150 when c falls from 0.8 to 0.5.