-Suppose the Price Level Is Fixed

question 338

Multiple Choice

-Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, equilibrium expenditure will increase by

• A) $1 trillion.
• B) $3 trillion.
• C) less than $1 trillion.
• D) indeterminate from the information given.

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Definitions:

Demand

The quantity of a particular good or service that consumers are willing and able to purchase at a given price level.

Budget Line

A graphical representation of all possible combinations of two goods which can be purchased with a given budget and prices.

Two-Product Case

A scenario in economic analysis focusing on the effects of changes in production levels, costs, and demand for two products simultaneously.

Change in Income

A variation in an individual's or household's earnings over a specific time frame.