-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The slope of the aggregate expenditure function is
A) -0.10.
B) 0.10.
C) 0.60.
D) 0.70.

Question

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The slope of the aggregate expenditure function is
A) -0.10. 
B) 0.10. 
C) 0.60. 
D) 0.70.

Quizplus · Accepted Answer

The slope of the aggregate expenditure function is determined by the marginal propensity to consume (MPC), which is the change in consumption (C) divided by the change in income. In the context of the aggregate expenditure function, which includes consumption (C), investment (I), government expenditure (G), and net exports (X - M), the slope is primarily influenced by the MPC because investment, government expenditure, and net exports are generally considered autonomous and do not change with income in the short run. Therefore, with an MPC of 0.60, the slope of the aggregate expenditure function is also 0.60.

-In the Above Table, C Is Consumption Expenditure, I Is