A decrease in the price level in the aggregate expenditures model would:
A)decrease aggregate expenditures and real GDP.
B)increase aggregate expenditures and real GDP.
C)decrease aggregate expenditures and increase real GDP.
D)increase aggregate expenditures and decrease real GDP.

Question

Quizplus · Accepted Answer

In the aggregate expenditures model, a decrease in the price level increases the real value of money, leading to higher consumption and investment, which increases aggregate expenditures and real GDP.

A Decrease in the Price Level in the Aggregate Expenditures