Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 63

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG =Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. All other things unchanged, an increase in the price level,

• A) shifts the aggregate expenditures curve upwards and causes the aggregate demand curve to shift right.
• B) shifts the aggregate expenditures curve downwards and causes the aggregate demand curve to shift left.
• C) shifts the aggregate expenditures curve down and causes a movement up along a given aggregate demand curve.
• D) shifts the aggregate expenditures curve upwards and causes a movement down along a given aggregate demand curve.

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Definitions:

Error

A mistake made in thinking or action that leads to incorrect or unintended results.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, indicating an inverse association.

Variable Increases

Situations or conditions where a measurable factor or quantity grows in magnitude or intensity.

Test-retest

A method used in psychological testing where the same test is administered to the same subjects at two different points in time to assess consistency.