In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.
A)up;rise
B)up;fall
C)down;rise
D)down;fall

Question

Quizplus · Accepted Answer

An increase in investment causes the aggregate demand (AD) function to shift upward, meaning that at any given price level, the quantity of output demanded would increase to meet the new level of investment demand. As a result, the equilibrium level of aggregate output would also rise, as shown by the intersection of the new AD function and the 45-degree line in the Keynesian cross diagram.

In the Keynesian Cross Diagram,an Increase in Investment Spending Because