Consider the AD/AS model.Suppose there is an increase in autonomous desired consumption at a given price level.The result is
A)the AE curve shifts downward and the AD curve shifts to the left.
B)the AE curve shifts downward and the AD curve shifts to the right.
C)the AE curve shifts upward and the AD curve shifts to the left.
D)the AE curve shifts upward and the AD curve shifts to the right.
E)no change in either the AE or the AD curve.

Question

Quizplus · Accepted Answer

An increase in autonomous desired consumption leads to an increase in aggregate expenditure at a given price level, causing the AE curve to shift upward. This increase in aggregate expenditure leads to an increase in aggregate demand (AD), causing the AD curve to shift to the right. Therefore, the correct answer is D - the AE curve shifts upward and the AD curve shifts to the right.

Consider the AD/AS Model