Consider the relationship between the AE curve and the AD curve. A fall in the amount of desired consumption, investment, government purchases, or net exports at any given level of national income
A)causes a shift of the AE curve but no movement of the AD curve.
B)shifts the AD curve to the right.
C)causes a movement along the AE curve.
D)causes a movement along the AD curve.
E)shifts the AD curve to the left.

Question

Quizplus · Accepted Answer

A fall in desired consumption, investment, government purchases, or net exports reduces aggregate expenditure at each income level, shifting the AE curve downwards. This decrease in aggregate expenditure leads to a leftward shift in the AD curve, as overall demand in the economy decreases.

Consider the Relationship Between the AE Curve and the AD