Answer to Question #62332 in Macroeconomics for Gian

Question #62332

In the Keynesian cross model ...
(a) an increase of the marginal propensity to save lowers the slope of the AE curve. (b) an increase of the marginal propensity to save shifts the AE curve downwards. (c) an increase of the marginal propensity to save lowers the income multiplier.
(d) the income multiplier cannot be negative.
(e) the paradox of thrift can occur because the output is determined by demand.

Expert's answer

c) an increase of the marginal propensity to save lowers the income multiplier.