A change in the price level shifts the aggregate expenditure curve but does not shift the aggregate demand curve.

Question

Quizplus · Accepted Answer

A change in the price level shifts the aggregate expenditure curve because it changes the real value of money and thus the amount of goods and services that can be purchased at each price level. However, it does not shift the aggregate demand curve because the aggregate demand curve is a function of the price level and the quantity of goods and services demanded, and a change in the price level does not change the quantity of goods and services demanded.

A Change in the Price Level Shifts the Aggregate Expenditure