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

Question

Quizplus · Accepted Answer

A decrease in investment leads to a downward shift of the aggregate expenditure curve, moving it from AE₀ to AE₁.

In the Above Figure the Economy Is Initially at Point