Question 20 2 pts In the figure above, if the MPC increased, the aggregate expen

Question

Question 20 2 pts In the figure above, if the MPC increased, the aggregate expenditure lines would and the multiplier woldin value. O become steeper, fall O become steeper, rise O not change; rise O not change; fall O become less steep: rise Question 21 2 pts The aggregate expenditure model (Keynesian cross) predicts a business cycle expansion occurs when O aggregate supply increases. iture increases. O the aggregate planned expenditure curve shifts downward. O potential GDP increases O induced expenditure decreases

Explanation / Answer

Question:20. If MPC increased, the aggregate expenditure lines would become steeper and the multiplier would rise in value. So the answer is B.

It is because the slope of the aggregate expenditure line is the MPC and if the value of MPC increased the slope will be higher and expenditure line will be steeper. The multiplier value is determined by 1/1-MPC. So if MPC increased the 1-MPC will fall and 1/1-MPC will rise.

Question:21. The aggregate expenditure model predicts a business cycle expansion occurs when - ans. C. The aggregate planned expenditure curve shifts downward.

It is because whenever planned expenditure curve shift downward it will increase the GDP and with the given supply= demand line(45° line) the economy will move to the higher level of Y.

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