The government-purchases multiplier and the MPC Consider two closed economies th

Question

The government-purchases multiplier and the MPC Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with Income and planned expenditure equal to dollar 100 billion, as shown by the black Xs on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its Initial planned-expenditure function has a slope of 0.5 and passes through the point (100, 100).

Explanation / Answer

yes, this line have 45 degrees slope from left to right in increasing mode.

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