Consider the relationship between the AE curve and the AD curve. A rise 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 left.
C)shifts the AD curve to the right.
D)causes a movement along the AE curve.
E)causes a movement along the AD curve.

Question

Quizplus · Accepted Answer

An increase in desired consumption, investment, government purchases or net exports at a given level of national income will cause a rise in aggregate expenditure (AE) at every level of income, shifting the AE curve to the right. This, in turn, will cause an increase in equilibrium output and price level, which represents movement along the AD curve. Therefore, the correct answer is C - a rise in the amount of desired consumption, investment, government purchases, or net exports at any given level of national income shifts the AD curve to the right.

Consider the Relationship Between the AE Curve and the AD