The expenditure schedule and the aggregate demand curve show much the same thing, with one crucial difference-the price level. How does the price level affect the two schedules?
The expenditure schedule is drawn assuming a fixed price level. If there is a change in the price level, then the wealth of consumers will change and this will cause a change in consumption at the same level of income. Therefore, the expenditure schedule will shift when the price level changes. In contrast, the aggregate demand schedule is constructed with the price level as the explanatory variable on the vertical axis. When the price level changes, this causes movement along the aggregate demand schedule indicating changes in the amount of real GDP demanded.
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A) adaptive; New Classical B) adaptive; Keynesian C) rational; New Classical D) rational; Keynesian
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Monetary neutrality is
What will be an ideal response?