Multiple Choice
Let AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, JG = Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + IP + G and all components of aggregate expenditures except consumption are autonomous. In this model, the slope of the AE curve is the
A) MPC and the multiplier is 1 ÷ (1 - MPC) .
B) MPC and the multiplier is 1 ÷ MPC.
C) multiplier and the multiplier is 1 ÷ MPS.
D) MPC and the multiplier is ∆AE ÷ ∆Y where Y = real GDP.
Correct Answer:
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