To illustrate the ultimate impact of the multiplier process when investment spending falls,we should
A)Shift the AD curve rightward once.
B)Shift the AD curve leftward twice,once for the autonomous change and second for the multiplier effect.
C)Shift the AD curve leftward and then rightward.
D)Shift the AD curve leftward and then shift the AS curve leftward.

Question

Quizplus · Accepted Answer

When investment spending falls, it results in a decrease in aggregate demand (AD). The decrease will initially cause an autonomous change in the AD curve, shifting it leftward once. However, the multiplier effect will magnify this initial decrease in AD. Therefore, we need to shift the AD curve leftward twice to show the ultimate impact of the multiplier process.

To Illustrate the Ultimate Impact of the Multiplier Process When