If autonomous consumption decreases,which of the following combinations of events would be most likely to occur?
A) An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a leftward shift of the aggregate demand curve
B) A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a leftward shift of the aggregate demand curve
C) A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a rightward shift of the aggregate demand curve
D) A downward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve
E) An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve.

Question

Quizplus · Accepted Answer

Autonomous consumption is a component of aggregate expenditure. If it decreases, then the aggregate expenditure line will shift downward. This will lead to a decrease in aggregate demand, which will shift the aggregate demand curve leftward. A decrease in autonomous consumption will also reduce the demand for money, which will shift the money demand curve leftward. Therefore, the correct combination of events is a downward shift of the aggregate expenditure line, a leftward shift of the money demand curve, and a leftward shift of the aggregate demand curve. Choice B is the only option that includes all of these shifts.

If Autonomous Consumption Decreases,which of the Following Combinations of Events