-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result A) the AE curve shifts upward to a curve such as AE₂. B) there is a movement along AE₁to a point such as B. C) the AE curve shifts downward to a curve such as AE₁. D) there is a movement along AE₁to a point such as C.

Question

Quizplus · Accepted Answer

When firms increase investment due to expected higher profits, the aggregate expenditure curve shifts upward, indicating an increase in overall spending in the economy.

-In the Above Figure the Economy Is Initially at Point