Question

In the diagram, the increase in output and aggregate demand is shown by E₁G = E₂G, and this magnitude is:

Options

• Smaller than the initial increase in autonomous expenditure

• Independent of the marginal propensity to consume

• Exactly equal to the initial increase in autonomous expenditure

• Greater than the initial increase in autonomous expenditure

Answer 1

The total expansion in output and aggregate demand, measured by E₁G = E₂G, exceeds the initial injection ΔĪ = 10. This shows the final income gain (50) is a multiple of the initial spending increase (10).