An increase in investment spending caused by higher expected rates of return will
A) shift the aggregate supply curve to the left.
B) move the economy up along an existing aggregate demand curve.
C) shift the aggregate expenditures curve downward and the aggregate demand curve to the left.
D) shift the aggregate expenditures curve upward and the aggregate demand curve to the right.

Question

Quizplus · Accepted Answer

An increase in investment spending due to higher expected rates of return will lead to an upward shift in the aggregate expenditures curve, as businesses spend more on investment goods. This, in turn, increases overall demand in the economy, shifting the aggregate demand curve to the right.

An Increase in Investment Spending Caused by Higher Expected Rates