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

question 80

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, an increase in the price level,

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

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Definitions:

Nominal GDP

The gross domestic product calculated at current market prices, without adjusting for inflation.

Transfer Payments

Payments made by the government to individuals or other entities without the government receiving any goods or services in return, such as welfare benefits or social security.

Net Exports

Net Exports is the value of a country's total exports minus the value of its total imports, indicating whether a country is a net exporter or importer.

U.S. GDP

Gross Domestic Product of the United States, measuring the total economic output of goods and services.