Using the standard 45-degree line diagram, how does an increase in investment spending effect the expenditure schedule?

Question

Quizplus · Accepted Answer

An increase in investment spending will shift the expenditure schedule upward as it increases GDP at each level of income. This is because investment spending is an injection into the circular flow of income and leads to a multiplier effect, increasing total expenditures in the economy. Therefore, the expenditure schedule will move further away from the 45-degree line, indicating higher levels of GDP at each level of income.

Using the Standard 45-Degree Line Diagram, How Does an Increase