Which of the Following Events Would Cause the AE Function

question 6

Multiple Choice

Which of the following events would cause the AE function to shift upwards in a parallel way?

• A)an increase in the MPC
• B)a decrease in the net tax rate
• C)a decrease in the business confidence of firms
• D)a decrease in foreign income
• E)a decrease in the aggregate price level

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Definitions:

Balanced Budget Rule

A fiscal policy regulation requiring that a government's spending does not exceed its income in a given period.

Recession

A period of economic decline across an economy lasting several months, typically recognized by a decrease in GDP, income, employment, and trade.

Price Level

The collective mean of prices for all produced goods and services in the economy at present.

Investment Spending

Expenditures on capital goods by businesses and individuals to add to their capital stock, contributing to future production.