Use the following to answer questions .
Exhibit: Aggregate Expenditures Curve
Figure 13-6
-(Exhibit: Aggregate Expenditures Curve) Suppose government purchases rise by $100. In the aggregate demand/aggregate supply model,
A) the aggregate demand curve shifts to the right by $100 at any given price level.
B) the aggregate demand curve shifts to the right by ($100 * the multiplier) at any given price level.
C) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100.
D) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier).

Question

Use the following to answer questions .
Exhibit: Aggregate Expenditures Curve
Figure 13-6 
-(Exhibit: Aggregate Expenditures Curve) Suppose government purchases rise by $100. In the aggregate demand/aggregate supply model,
A) the aggregate demand curve shifts to the right by $100 at any given price level. 
B) the aggregate demand curve shifts to the right by ($100 * the multiplier) at any given price level. 
C) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100. 
D) there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier).

Quizplus · Accepted Answer

According to the exhibit, an increase in government purchases would shift the aggregate expenditures curve upward by the amount of the increase ($100) multiplied by the multiplier (F1F1F1S1). This represents a shift of the aggregate demand curve to the right at any given price level, and an increase in real GDP demanded by the amount of the multiplier multiplied by the initial change in government purchases ($100). Therefore, the correct answer is B.

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