On the aggregate expenditure graph, suppose autonomous investment decreases by $10 billion.What will be the effect on the aggregate expenditure line?
A) The aggregate expenditure line will shift upward by $10 billion.
B) The aggregate expenditure line will shift by some multiple.
C) The aggregate expenditure line will shift downward by $10 billion.
D) The equilibrium level of real GDP demanded will decrease by $10 billion.

Question

On the aggregate expenditure graph, suppose autonomous investment decreases by $10 billion.What will be the effect on the aggregate expenditure line?  
A) The aggregate expenditure line will shift upward by $10 billion. 
B) The aggregate expenditure line will shift by some multiple. 
C) The aggregate expenditure line will shift downward by $10 billion. 
D) The equilibrium level of real GDP demanded will decrease by $10 billion.

Quizplus · Accepted Answer

Autonomous investment is a component of the aggregate expenditure line which determines the level of expenditures at each level of real GDP. A decrease in autonomous investment will shift the aggregate expenditure line downward by the same amount, moving the equilibrium level of real GDP demanded down by $10 billion as well.

On the Aggregate Expenditure Graph, Suppose Autonomous Investment Decreases by $10