Explanation Figure -1 illustrates recessionary and inflationary expenditure gap: In Figure -1, the horizontal axis measures real GDP and the vertical axis measures aggregate expenditure. The curve AE represents aggregate expenditure curve. The AE 0 indicates aggregate expenditure at full employment level. Option (b): Marginal propensity to consume (MPC) can be calculated as follows: MPC = Aggregate expenditure New − Aggregate expenditure Old Real GDP New − Real GDP Old = 505 − 490 510 − 490 = 15 20 = 0.75 The value of MPC is 0.75. Thus, option ‘b’ is correct

MPC. | bartleby

MACROECONOMICS W/CONNECT

18th Edition

ISBN: 9781307253092

Author: McConnell

Publisher: Mcgraw-Hill/Create

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Chapter 11.7, Problem 1QQ

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MPC.

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Chapter 11.2, Problem 4QQ

Chapter 11.7, Problem 2QQ

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