Deriving the Multiplier Algebraically

16. Deriving the Aggregate Expenditures Model / Deriving the Multiplier Algebraically / Problem 4

Problem 4

Simplify the equation Y - MPC * Y = a + I by factoring out the common term.

Y * MPC = a + I

Y * (1 - MPC) = a + I

Y * (1 + MPC) = a + I

Y = a + I - MPC