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

1 Answer
Nov 2, 2015

Refer the explanation

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 Y1 level of income and FG at Y2 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.