Because the short-run aggregate expenditure model assumes that the price level is _________, its predicted effect of changes in autonomous expenditure on equilibrium output is_________ than the prediction of the AD/SAS model.
A) fixed; less
B) flexible; greater
C) fixed; greater
D) flexible; less

Question

Quizplus · Accepted Answer

The short-run aggregate expenditure model assumes that the price level is fixed, which means that changes in autonomous expenditure have a more direct and greater impact on equilibrium output compared to the AD/SAS model, where price levels can adjust.

Because the Short-Run Aggregate Expenditure Model Assumes That the Price