In a closed economy without government, the slope of aggregate expenditure curve is determined by the slope of the consumption function.

Question

Quizplus · Accepted Answer

In a closed economy without government, aggregate expenditure primarily consists of consumption and investment. Since investment is generally considered autonomous and not dependent on income in the short run, the slope of the aggregate expenditure curve is indeed determined by the slope of the consumption function, which reflects the marginal propensity to consume.

In a Closed Economy Without Government, the Slope of Aggregate