J. Bradford DeLong
The aggregate demand line on the income-expenditure diagram slopes upward because consumption is higher when national income is higher. The slope of the aggregate demand line--the amount by which aggregate demand increases for every dollar increase in national income--is approximately equal to the marginal propensity to consume.
The slope of the aggregate demand line is approximately equal to the marginal propensity to consume because none of the other three major components of aggregate demand depends strongly on national income. Government purchases, investment spending, and net exports are all more-or-less independent of the level of national income.
|The Multiplier Stepping Through the Multiplier The Multiplier and the MPC|
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