An increase in aggregate expenditure has what result on equilibrium GDP?
A)Equilibrium GDP rises.
B)Equilibrium GDP is not affected by an increase in aggregate expenditure.
C)Equilibrium GDP falls.
D)Equilibrium GDP may rise or fall depending on the size of the increase in aggregate expenditure relative to the initial level of GDP.

Question

Quizplus · Accepted Answer

An increase in aggregate expenditure leads to an increase in the demand for goods and services, which induces firms to produce more. This increase in production leads to an increase in equilibrium GDP.

An Increase in Aggregate Expenditure Has What Result on Equilibrium