-In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would
A)decrease.
B)increase.
C)stay the same but the AE curve would shift upwards.
D)stay the same but the AE curve would shift downwards.

Question

-In the above figure, if the marginal propensity to consume increases, the slope of the AE curve would
A)decrease. 
B)increase. 
C)stay the same but the AE curve would shift upwards. 
D)stay the same but the AE curve would shift downwards.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the fraction of each additional dollar of income that is spent on consumption. If the MPC increases, then people will spend more of each additional dollar of income, which will lead to an increase in aggregate expenditure (AE). The AE curve shows the relationship between the price level and the quantity of goods and services demanded. An increase in AE will lead to an increase in the price level, which will in turn lead to an increase in the slope of the AE curve.

-In the Above Figure, If the Marginal Propensity to Consume