Other things equal, the slope of the aggregate expenditures schedule will increase as a result of
A)a decline in the size of the inflationary gap.
B)an increase in the MPC.
C)an increase in the MPS.
D)a decline in the general price level.

Question

Quizplus · Accepted Answer

An increase in the MPC (marginal propensity to consume) will increase the slope of the aggregate expenditures schedule. This is because the MPC measures the change in consumption spending for a given change in disposable income. A higher MPC means that consumers will spend a larger proportion of any increase in disposable income, which will lead to a greater increase in aggregate expenditures.

Other Things Equal, the Slope of the Aggregate Expenditures Schedule