An increase in the price level in the United States will have what effect on the aggregate expenditure line?
A)Aggregate expenditure will shift downward.
B)Aggregate expenditure will become steeper.
C)Aggregate expenditure will shift upward.
D)Aggregate expenditure will not be affected by an increase in the price level in the United States.

Question

Quizplus · Accepted Answer

An increase in the price level will reduce the purchasing power of consumers, making them able to afford fewer goods and services. This will lead to a decrease in consumption expenditure and, hence, a shift downward in the aggregate expenditure line.

An Increase in the Price Level in the United States