Suppose there is an increase in the marginal propensity to spend out of national income.The result will be
A)a movement to the right along the AE curve.
B)a movement to the left along the AE curve.
C)an increase in the slope of the AE curve.
D)a decrease in the slope of the AE curve.
E)a parallel upward shift in the AE curve.

Question

Quizplus · Accepted Answer

An increase in the marginal propensity to spend out of national income means that for every additional unit of income, more is spent. This increases the slope of the Aggregate Expenditure (AE) curve, as the curve becomes steeper with a higher marginal propensity to spend.

Suppose There Is an Increase in the Marginal Propensity to Spend