Consider the AD curve in the simple macro model.Suppose there is an increase in autonomous desired consumption at a given price level.The result is
A)the AE curve shifts downward and the AD curve shifts to the left.
B)the AE curve shifts downward and the AD curve shifts to the right.
C)the AE curve shifts upward and the AD curve shifts to the left.
D)the AE curve shifts upward and the AD curve shifts to the right.
E)no change in either the AE or the AD curve.

Question

Quizplus · Accepted Answer

An increase in autonomous desired consumption at a given price level would cause the AE curve to shift upward, since consumption is a component of aggregate expenditures. This would lead to an increase in real GDP at any given price level, causing the AD curve to shift to the right.

Consider the AD Curve in the Simple Macro Model