FIGURE 23-1

-Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P0.Other things being equal,exogenous changes in the price level will cause
A)movement along the aggregate expenditure curve AE0 and shifts of the AD curve.
B)movement along the aggregate expenditure curve AE0 and movement along the aggregate demand curve AD0.
C)shifts of the AE curve and shifts of the AD curve.
D)shifts of the AE curve and movement along the aggregate demand curve AD0.
E)no change in either the AE curve or the AD curve.

Question

FIGURE 23-1

-Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P0.Other things being equal,exogenous changes in the price level will cause
A)movement along the aggregate expenditure curve AE0 and shifts of the AD curve. 
B)movement along the aggregate expenditure curve AE0 and movement along the aggregate demand curve AD0. 
C)shifts of the AE curve and shifts of the AD curve. 
D)shifts of the AE curve and movement along the aggregate demand curve AD0. 
E)no change in either the AE curve or the AD curve.

Quizplus · Accepted Answer

Exogenous changes in the price level will shift the AE curve because they affect consumption, investment, and net exports, leading to a movement along the AD curve as the overall quantity of goods and services demanded changes.

FIGURE 23-1 -Refer to Figure 23-1.Assume the Economy Is Initially in Equilibrium