Answer
Marginal propensity to consume =change in aggregate expenditure
/change in real GDP
using the point at the real GDP 500 and 0
(500,500) and (0,312.50)
MPC=(500-312.5)/(500-0)
=0.375
the marginal propensity to consume is 0.375
Planned aggregate spending (billions of dollars) 45-degree line AE $575 500 425 312.50 $300 500 700...
QUESTION 20 Figure: Aggregate Expenditures I Planned aggregate spending (blllions of dollars) $575 500 425 312.50 500 Real GDP billions of dollars) in the diagram above, the marginal propensity to consume equals
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Exhibit 23-5 Spending 45-degree line E Expenditure line Income or Real GDP Reference: Ref 11-3 If spending was equal to the amount corresponding to point B in Exhibit 23-5, aggregate output would increase. aggregate output would decrease. spending is too high, and the expenditure line will shift down. the economy would be in equilibrium the marginal propensity to consume would increase.
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