Whenever there is an increase in autonomous consumption spending,there will be
A) an upward shift of the aggregate expenditure line causing equilibrium GDP to rise
B) an upward shift of aggregate expenditure line,but no change in equilibrium GDP
C) no change in the aggregate expenditure line,but equilibrium GDP will rise
D) an upward shift of the aggregate expenditure line,causing equilibrium GDP to fall
E) no change in the aggregate expenditure line or equilibrium GDP

Question

Quizplus · Accepted Answer

An increase in autonomous consumption spending means that at every level of GDP, consumption spending is higher. This will lead to an upward shift of the aggregate expenditure (AE) line. As a result, a new equilibrium GDP will be reached where the new AE line intersects with the 45-degree line. Since the AE line has shifted upward, the equilibrium GDP will also increase. Therefore, choice A is the correct answer.

Whenever There Is an Increase in Autonomous Consumption Spending,there Will