Question

Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE1 to AE2

would:
A) move the economy from A to C along AD1
B) move the economy from C to A along AD1
C) increase aggregate demand from AD1
to AD2
D) decrease aggregate demand from AD2
to AD1

Answer 1

i think the answer is c it is guess

Answer 2

An increase in aggregate expenditures at a constant price level would increase aggregate demand from AD1 to AD2, reflecting an outward shift of the aggregate demand curve.

Step-by-step explanation:

When discussing the effects of an increase in aggregate expenditures at a constant price level, it's crucial to understand how this affects the aggregate demand curve. If aggregate expenditures increase from AE1 to AE2, it usually indicates that there is an increase in the components of aggregate demand (like consumption, investment, government spending, or net exports). In this context, assuming a constant price level to be an abstraction for simplification, an increase in aggregate expenditures reflects higher demand for goods and services and, therefore, would increase aggregate demand from AD1 to AD2. It corresponds to an outward shift of the aggregate demand curve, depicting a higher level of aggregate expenditures at every price level, leading to a new equilibrium with a potentially higher level of output.