Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by
A) $200 billion.
B) $200 billion *the multiplier.
C) $200 billion * marginal propensity to consume.
D) $200 billion *(1 ÷ marginal propensity to consume).

Question

Quizplus · Accepted Answer

Government purchases are an autonomous component of aggregate expenditure. An increase in government purchases will shift the aggregate expenditure curve up by the full amount of the increase.

Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate