If there is a decrease in autonomous expenditure,the new AE curve is
A)flatter than the original AE curve.
B)steeper than the original AE curve.
C)parallel and above the original AE curve.
D)parallel and below the original AE curve.
E)none of the above.

Question

Quizplus · Accepted Answer

When there is a decrease in autonomous expenditure, the new AE curve will be parallel and below the original AE curve. This is because a decrease in autonomous expenditure will lead to a reduction in the overall level of economic activity, resulting in a lower level of equilibrium output and income. The new AE curve will run parallel to the original AE curve as the MPC and multiplier remain the same, but the intercept will be lower due to the decrease in autonomous expenditure. Hence, option D is the correct answer.

If There Is a Decrease in Autonomous Expenditure,the New AE