An increase in real GDP leads to
A) an increase in aggregate planned expenditure.
B) a decrease aggregate planned expenditure.
C) no change in aggregate planned expenditure.
D) a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases.

Question

Quizplus · Accepted Answer

An increase in real GDP leads to an increase in income and therefore an increase in consumption, investment, and government spending, which are all components of aggregate planned expenditure. Therefore, there will be an increase in aggregate planned expenditure.

An Increase in Real GDP Leads to