Consider a simple macro- model with demand- determined output. An exogenous increase in the domestic price level will the real value of the private sector's wealth, which leads to in autonomous consumption and thus shift in the AE function.
A)increase; an increase; an upward
B)increase; a decrease; a downward
C)increase; an increase; a downward
D)reduce; an increase; an upward
E)reduce; a decrease; a downward

Question

Quizplus · Accepted Answer

An increase in the domestic price level reduces the real value of the private sector's wealth, leading to a decrease in autonomous consumption and a downward shift in the Aggregate Expenditure (AE) function.

Consider a Simple Macro- Model with Demand- Determined Output