Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 25

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G = Government Purchases.Consider a simple aggregate expenditures model, where
AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous.In this model, the slope of the AE curve is the ___ and the multiplier is _____.

• A)MPC; 1 ÷ (1 - MPC)where MPC = marginal propensity to consume
• B)MPC; 1 ÷ MPC
• C)multiplier; 1 ÷ MPS where MPS = marginal propensity to save
• D)MPC; ?AE ÷ ?Y where Y = real GDP

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