If a country has an expenditure multiplier of 10, the slope of its aggregate planned expenditure (AE) curve is
A) .10.
B) .50.
C) .90.
D) 10.00.
E) .80.

Question

Quizplus · Accepted Answer

The slope of the AE curve is equal to the marginal propensity to consume (MPC). If the expenditure multiplier is 10, the MPC must be 0.9 (1/1-0.1 = 10), therefore the slope of the AE curve is 0.9 or 0.90.

If a Country Has an Expenditure Multiplier of 10, the Slope