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

question 55

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, a decrease in the price level

• A) causes a movement up along a given aggregate expenditures curve and raises the equilibrium real GDP.
• B) shifts the aggregate expenditures curve upwards and raises the equilibrium real GDP.
• C) causes a movement down a given aggregate expenditures curve and lowers the equilibrium real GDP.
• D) shifts the aggregate expenditures curve downwards and lowers the equilibrium real GDP.

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Definitions:

Inflations

The speed at which the overall price level of goods and services increases, leading to a decrease in buying power.

Taxes

Compulsory financial charges imposed by a government on individuals or entities to fund public expenditures.

Automatic Stabilizer

Economic strategies and initiatives aimed at balancing shifts in a country's economic performance without interference from governmental or policy-making bodies.

Supply-Side

Economic theory that emphasizes the importance of increasing supply (production of goods and services) as the key to economic growth, lower unemployment, and lower inflation.