Suppose at each price level, autonomous aggregate expenditures fall by $80 billion. As a result, the aggregate expenditures curve shifts
A) downward at each price level and results in a leftward shift in aggregate demand.
B) upward at each price level and results in a rightward shift in aggregate demand.
C) downward at each price level and results in a movement down along a given aggregate demand.
D) upward at each price level and results in a movement up along a given aggregate demand.

Question

Quizplus · Accepted Answer

Autonomous aggregate expenditures falling by $80 billion at each price level means that at every level of output, there is a decrease in spending. This decreases the overall demand for goods and services, causing a leftward shift in the aggregate demand curve. Therefore, the correct choice is A.

Suppose at Each Price Level, Autonomous Aggregate Expenditures Fall by $80