The larger the slope of the AE curve, the
A) more likely that the multiplier will be inconsequential.
B) larger the value of the multiplier.
C) less likely that the multiplier will be affected.
D) smaller the value of the multiplier.

Question

Quizplus · Accepted Answer

The slope of the AE curve represents the marginal propensity to consume (MPC), which is the change in consumption resulting from a change in income. A larger slope (or MPC) means that a given change in autonomous expenditure will result in a larger change in equilibrium output. This indicates a larger value for the multiplier, which is the ratio of the change in output to the initial change in autonomous expenditure. Therefore, choice B is correct.

The Larger the Slope of the AE Curve, the