Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 125

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to
Aggregate demand?

• A) It shifts left by $150 billion.
• B) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion.
• C) It shifts right by $150 billion
• D) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.

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