If autonomous expenditure increases with no change in the price level, what happens to the AE curve and the AD curve? Which curve shifts by an amount that is determined by the multiplier and why?
What will be an ideal response?
A change in autonomous expenditure with no change in the price level shifts both the AE curve and the AD curve. The AE curve shifts by an amount equal to the change in autonomous expenditure. The multiplier determines the magnitude of the shift in the AD curve. The AD curve shifts by an amount equal to the change in autonomous expenditure multiplied by the multiplier.
You might also like to view...
In the long run, inflation
a. and unemployment are primarily determined by labor market factors. b. and unemployment are primarily determined by the rate of money supply growth. c. is primarily determined by the rate of money supply growth while unemployment is primarily determined by labor market factors. d. is primarily determined by labor market factors while unemployment is primarily determined by the rate of money supply growth.
The law of supply states that, other things equal, as the price of a good goes:
A. down, the supply goes down. B. up, the quantity supplied goes up. C. down, the quantity supplied goes up. D. up, the supply goes down.
A decrease in the money supply aimed at decreasing aggregate output is referred to as
A) contractionary fiscal policy. B) expansionary fiscal policy. C) expansionary monetary policy. D) contractionary monetary policy.
A movement downward toward the right along a typical production possibilities curve represents
a. decreasing production of both goods under consideration. b. increasing production of both goods under consideration. c. increasing production of one good and decreasing production of the other. d. increasing production of one good with no change in production of the other.