When Autonomous Expenditure Increases, Equilibrium Aggregate Expenditure

question 52

Multiple Choice

When autonomous expenditure increases, equilibrium aggregate expenditure

• A) decreases by a greater amount due to the multiplier.
• B) increases by a greater amount due to the multiplier.
• C) increases by an equal amount.
• D) decreases by an equal amount to offset the unplanned portion.

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Definitions:

Menu Costs

The costs of changing prices.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, serving as an indicator of inflation or deflation.

Aggregate Quantity

The total amount or sum of goods and services produced or supplied in an economy at a given overall price level during a specific time period.

Aggregate Demand

The total demand for all goods and services within an economy at different price levels, during a specified time period.