A rise in MPC makes the total expenditures (TE)curve __________ and __________ the multiplier.
A) steeper; raises
B) steeper; lowers
C) flatter; raises
D) flatter; lowers

Question

Quizplus · Accepted Answer

An increase in MPC (marginal propensity to consume) implies that people tend to spend more of their income on goods and services, which leads to a rise in the total expenditures (TE) curve. As a result, the slope of the TE curve becomes steeper, and the value of the multiplier increases. Hence, choice A is the correct answer.

A Rise in MPC Makes the Total Expenditures (TE)curve __________