An increase in the price level shifts the aggregate planned expenditure curve downward and results in a movement along the aggregate demand curve

Question

Why does an increase in the price level result in a shift in the aggregate planned expenditure curve rather than a movement along it?

Answer 1

The increase in the price level shifts the aggregate planned expenditure curve because the aggregate planned expenditure curve plots expenditure against real GDP. In other words, the curve shows how aggregate planned expenditure changes when real GDP changes. Thus a change in real GDP results in a movement along the aggregate planned expenditure curve. But the effect from an increase in the price level creates a shift in the curve because at any level of real GDP, a higher price level means a lower level of expenditure. Because the effect of the higher price level applies at all levels of real GDP, the aggregate planned expenditure curve shifts downward.