A rise in the price level
A)decreases aggregate expenditure and produces a movement up along the aggregate demand curve.
B)decreases aggregate expenditure and produces a leftward shift of the aggregate demand curve.
C)increases aggregate expenditure, but has no effect on the aggregate demand curve.
D)has no effect on aggregate expenditure.
E)decreases aggregate expenditure and produces a rightward shift of the aggregate demand curve.

Question

Quizplus · Accepted Answer

A rise in the price level decreases aggregate expenditure because goods and services become more expensive, leading to a decrease in the quantity demanded. This results in a movement up along the aggregate demand curve, not a shift of the curve itself. Shifts in the aggregate demand curve are caused by factors other than price level changes, such as changes in consumer confidence, fiscal policy, or investment spending.

A Rise in the Price Level