Asked by Laura-Leigh Holley on Jun 27, 2024
Verified
If the level of autonomous spending in an economy increases at a given price level,_____.
A) the aggregate expenditure line shifts upward and the economy moves upward along the aggregate demand curve
B) the aggregate expenditure line shifts downward and the economy moves upward along the aggregate demand curve
C) the aggregate expenditure line shifts upward and the aggregate demand curve shifts to the right
D) the aggregate expenditure line shifts downward and the aggregate demand curve shifts to the left
E) the aggregate expenditure curve shifts upward and the aggregate demand curve shifts to the left
Autonomous Spending
Spending that does not depend on the current level of national income or output, such as investments, government spending, and exports.
Aggregate Expenditure Line
A graphical representation showing the total planned spending on goods and services at different levels of national income.
- Acknowledge the influence of fluctuations in aggregate demand and aggregate expenditure curves on economic conditions.
- Recognize the role of autonomous spending in shifting the aggregate demand and expenditure curves.
Verified Answer
AK
Aneesh KurianJun 30, 2024
Final Answer :
C
Explanation :
An increase in autonomous spending means that at every price level, there is an increase in the level of planned expenditure. This will cause the aggregate expenditure line to shift upward, as the level of expenditure is now higher for any given level of income. This, in turn, will shift the aggregate demand curve to the right, as there is now a higher level of demand for goods and services at every price level. Therefore, both the aggregate expenditure line and the aggregate demand curve will shift upward.
Learning Objectives
- Acknowledge the influence of fluctuations in aggregate demand and aggregate expenditure curves on economic conditions.
- Recognize the role of autonomous spending in shifting the aggregate demand and expenditure curves.