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

question 89

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

• A) MPC and the multiplier is 1 ÷ (1 - MPC).
• B) MPC and the multiplier is 1 ÷ MPC.
• C) multiplier and the multiplier is 1 ÷ MPS.
• D) MPC and the multiplier is ∆AE ÷ ∆Y where Y = real GDP.

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