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

question 80

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G = Government Purchases. Consider a simple aggregate expenditures model, where
AE = 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) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP.
• B) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP.
• C) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP.
• D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

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