The Slope of the Aggregate Expenditure Function Is the Sum

question 30

Multiple Choice

The slope of the aggregate expenditure function is the sum of the:

• A)marginal propensity to consume and marginal propensity to save.
• B)marginal propensity to consume and marginal propensity to invest.
• C)marginal propensity to consume, marginal propensity to save, and marginal propensity to import.
• D)marginal propensity to consume, marginal propensity to invest, and marginal propensity to import.

---

Definitions:

Average Total Cost Curve

A graphical representation showing how the total cost per unit of output varies with the level of output, typically U-shaped due to economies and diseconomies of scale.

Long-run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments, resulting in no economic profit in perfect competition.

Excess Capacity

Refers to the situation where a firm produces at a level less than its potential output, leading to underutilized resources.

Short Run

A period of time in which at least one input (typically capital) is fixed, affecting the firm's capacity to adjust its production levels.