In the simple aggregate expenditure model,the slope of the aggregate expenditure line depends on
A)interest rates
B)government budget policy
C)the price level
D)the marginal propensity to consume
E)all of the above

Question

Quizplus · Accepted Answer

The slope of the aggregate expenditure line is determined by the marginal propensity to consume (MPC), which is the amount of each additional dollar of income that is spent on consumption. The MPC determines how much the aggregate expenditure will increase for each increase in income, and therefore affects the slope of the aggregate expenditure line. The other factors listed (interest rates, government budget policy, and the price level) can affect aggregate expenditure in various ways, but they do not directly determine the slope of the aggregate expenditure line.

In the Simple Aggregate Expenditure Model,the Slope of the Aggregate