FIGURE 22-4 Refer to Figure 22-4.The rotation from AE₀ to AE₁ implies that the marginal propensity to spend ________ and the value of the simple multiplier ________. A)increases; decreases B)increases; increases C)remains the same; increases D)decreases; increases E)decreases,decreases

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Quizplus · Accepted Answer

The rotation implies an increase in autonomous expenditure (AES) and a decrease in leakages (represented by the shift from S1U1B10 to S1U1B11). This leads to an increase in the value of the simple multiplier, as the increase in AES will lead to a proportionally larger increase in equilibrium output. Additionally, since the marginal propensity to spend is equal to the slope of the consumption function, an increase in AES will also lead to an increase in the marginal propensity to spend.