Income-Expenditure Diagram (HSC SSCE Economics): Flashcards

Keynesian cross diagram

Income $(Y)$

Points where expenditure equals income

$C + I + G + (X - M)$

$C = C_0 + ext{mpc} imes Y$

MPC < 1; not all income spent, some saved

Where AD line intersects 45° $Y=E$ line

Rise in $C$, $I$, $G$, or $X$; fall in $M$

Change in income larger than initial change in AD

Equilibrium income below full employment $(Y_e < Y_f)$