Does the slope of the aggregate expenditures curve in the Keynesian model equal the marginal propensity to consume?

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Answer 1 · 2015-11-02T07:28:04

Refer the explanation

In a simple Keynesian model, the slope of the Aggregate Expenditure curve is the same as marginal propensity to consume.

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Look at the graph. Consumption expenditure is represented by 'C' Its slope is the same as $MPC$ .

At each level of income, the business community decides to invest a fixed amount. Investment is autonomous.

C + I is the aggregate expenditure curve.

It decides to invest $ET$ at $Y_1$ level of income and $FG$ at $Y_2$ level of income.

$ET$ is the same as $FG$ . Hence C and C + I are parallel.

From this it follows that C and C + I have the same slope.