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Created 3/10/1998
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Building Up the Income-Expenditure Diagram

J. Bradford DeLong
delong@econ.berkeley.edu
http://www.j-bradford-delong.net


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     


Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

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