The Keynesian Aggregate Expenditure Model: Understanding the Impact of Marginal Propensity to Consume

The Larger the Marginal Propensity to Consume: A Key Factor in the Keynesian Aggregate Expenditure Model

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In the Keynesian aggregate expenditure model, the larger the marginal propensity to consume,

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The expenditure multiplier is found by M = 1/(1-MPC). Thus, the larger the MPC the larger the multiplier. The multiplier magnifies changes in aggregate expenditure into larger changes in aggregate output. the larger the multiplier then, the greater the change in income derived from a given change in private investment.

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