A larger marginal propensity to import will make the slope of the aggregate expenditure function flatter.

Question

Quizplus · Accepted Answer

This is because a larger marginal propensity to import means that a greater proportion of each additional dollar of income will be spent on imports rather than domestically produced goods and services, thus reducing the impact of changes in autonomous or government spending on overall output. This results in a shallower slope, or a flatter Aggregate Expenditure (AE) function.

A Larger Marginal Propensity to Import Will Make the Slope