Question

An increase in aggregate expenditures resulting from some factor other than a change in the price level is

equivalent to:
A) a rightward shift of the aggregate demand curve in the AD-AS model.
B) a leftward shift of the aggregate demand curve in the AD-AS model.
C) a movement downward along a fixed aggregate demand curve in the AD-AS model.
D) a decrease in aggregate supply in the AD-AS model.

Answer 1

An increase in aggregate expenditures that does not result from a change in the price level causes a rightward shift of the aggregate demand curve in the AD-AS model, leading to higher output and price levels.

Step-by-step explanation:

An increase in aggregate expenditures that is not caused by a change in the price level typically represents an autonomous change in one of the components of aggregate demand: consumption (C), investment (I), government spending (G), or net exports (X-M). When these components rise, it results in a rightward shift of the aggregate demand curve in the Aggregate Demand-Aggregate Supply (AD-AS) model.

With a rightward shift, the new equilibrium will have both a higher quantity of output and a higher price level. This is opposed to a leftward shift of aggregate demand, which would lead to a decrease in the quantity of output and the price level.