Question

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

Answer 1

Refer the explanation

Explanation:

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

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.