An Increase in Autonomous Investment Causes the ____ and _____

question 21

Multiple Choice

An increase in autonomous investment causes the ____ and _____ curves to shift to the right.

• A) IS, LM
• B) IS, AD
• C) LM, AD
• D) none of the above

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Definitions:

Marginal Propensity

The proportion of an additional income that an individual spends on consuming goods and services, rather than saving.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, suggesting how income influences spending behavior.

Aggregate Demand Curve

A graphical representation that shows the total quantity of goods and services that all households, businesses, and government are willing to purchase at each possible price level.

Autonomous Spending

Expenditures in an economy that do not vary with the level of income or production, such as government spending or investment.