An increase in the price level, other things equal, will shift the
A) consumption, investment, and net exports schedules of the aggregate expenditures model downward.
B) consumption, investment, and net exports schedules of the aggregate expenditures model upward.
C) consumption and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward.
D) consumption and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.

Question

Quizplus · Accepted Answer

An increase in the price level will result in a decrease in purchasing power, as prices for goods and services rise. This leads to a decrease in consumption, investment, and net exports as consumers and businesses reduce spending. Therefore, the schedules of the aggregate expenditures model shift downward.

An Increase in the Price Level, Other Things Equal, Will