Consider the AD/AS model. Suppose there is an increase in autonomous desired consumption at a given price level. The result is
A)the AE curve shifts upward and the AD curve shifts to the right.
B)the AE curve shifts downward and the AD curve shifts to the right.
C)no change in either the AE or the AD curve.
D)the AE curve shifts upward and the AD curve shifts to the left.
E)the AE curve shifts downward and the AD curve shifts to the left.

Question

Quizplus · Accepted Answer

An increase in autonomous desired consumption means that spending has increased in the economy, which will cause the AE curve to shift upward. This increase in spending will also cause businesses to increase production and therefore increase demand for goods and services, thus shifting the AD curve to the right.

Consider the AD/AS Model