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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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Chapter
Section
BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 9, Problem 14E
Textbook Problem
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Why is the slope of the C + I + G function different from the slope of the C + I + G + X function?

To determine

To write:

The reason for the C+I+G function having a different slope from the slope of the C+I+G+X function.

Explanation of Solution

In both the AE functions, investment (I) is assumed to be autonomous. Government expenditure (G) does not depend on income level. Hence, for the AE function of a closed economy the slope of the function depends on the rate of change of consumption level with respect to change in income which is nothing but the marginal propensity to consume (MPC)...

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