-In the Above Figure the Economy Is Initially at Point

question 28

Multiple Choice

-In the above figure the economy is initially at point A on the aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result

• A)there is a movement along AE₁ to a point such as B.
• B)the AE curve shifts upward to a curve such as AE₂.
• C)there is a movement along AE₁ to a point such as C.
• D)the AE curve shifts downward to a curve such as AE₁.

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Definitions:

Consumer Price Inflation

The pace at which the average cost of goods and services elevates, resulting in diminished purchasing capacity.

CPI

The CPI, or Consumer Price Index, tracks the average variation in prices that urban customers pay for a selection of consumer goods and services over a period of time.

Consumer Price Index

A metric assessing the weighted mean of costs for a variety of consumer items and services, including food, transportation, and healthcare.

Inflation

The rate at which the general cost of goods and services rises, causing a decrease in the value of money.