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Real Disposable Income Consumption Investment Aggregate Expenditure 0 200 100 300 100 225 100 325 200 250 100 350 300 275 100 375 400 300

Real Disposable Income

Consumption

Investment

Aggregate Expenditure

0

200

100

300

100

225

100

325

200

250

100

350

300

275

100

375

400

300

100

400

500

325

100

425

600

350

100

450

700

375

100

475

800

400

100

500

  1. Explain the concept of the spending multiplier. How is it calculated? Calculate the spending multiplier given a marginal propensity to consume of 0.6?

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