Everything else remaining the same, an increase in the marginal propensity to consume ________ the slope of the AE curve and ________ equilibrium expenditure.
A)decreases; increases
B)increases; increases
C)decreases; decreases
D)increases; decreases
E)does not change; does not change

Question

Quizplus · Accepted Answer

An increase in the marginal propensity to consume means that for every additional dollar of income, there will be a larger increase in consumption spending. This will shift the AE curve upward, increasing the slope and increasing equilibrium expenditure.

Everything Else Remaining the Same, an Increase in the Marginal