If investment changes because of a change in a factor other than the price level,then the
A) economy moves from one point on an AD curve to another point on the same curve.
B) AD curve shifts.
C) economy moves from one point on a short-run aggregate supply (SRAS)curve to another point on the same curve.
D) SRAS curve shifts.
E) none of the above

Question

Quizplus · Accepted Answer

Investment is one of the components of aggregate demand (AD) and a change in investment will cause a shift in the AD curve. The movement from one point on the old AD curve to another point on the new AD curve will reflect the change in investment. Options A and C are incorrect as they only refer to movement along a curve, not a shifting of the curve. Options D and E are also incorrect as they refer to changes in short-run aggregate supply (SRAS) which is unrelated to changes in investment.

If Investment Changes Because of a Change in a Factor