The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy starts at PAE₂. Which change would cause a move from PAE₂ to PAE₃? A) Consumption spending increases. B) Investment decreases. C) Imports increase. D) Exports decrease.

Question

Quizplus · Accepted Answer

A move from PAE₂ to PAE₃ would require an increase in aggregate expenditure. An increase in consumption spending, which is a component of aggregate expenditure, would cause such an increase in aggregate expenditure and result in the desired shift from PAE₂ to PAE₃. Therefore, the correct answer is A. The other options would not cause an increase in aggregate expenditure and would not result in the desired shift.

The Figure Shows Planned Aggregate Expenditure and Output for an Economy