The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would shift the PAE curve upward? A) An increase in wealth. B) An increase in interest rates. C) And increase in taxes. D) An increase in imports.

Question

Quizplus · Accepted Answer

An increase in wealth would shift the PAE curve upward because it would increase consumption spending and therefore increase planned aggregate expenditure at each level of output.

The Figure Shows Planned Aggregate Expenditure and Output for an Economy