5Chp20-Econ3310 - Expenditure Multiplier ISLM Model If Yd...

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Unformatted text preview: Expenditure Multiplier ISLM Model If Yd increases by $100, consumption increases by $mpc . a : autonomous consumer expenditure ∆C /∆Yd = mpc : marginal propensity to consume, 0 < mpc < 1 C = a + mpc × Yd The consumption function: Disposable income Yd (income after taxes: Y − T , T are taxes) What determines C? Consumption Expenditure and the Consumption Function Aggregate Output ...
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