-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) there is a movement along AE₁to a point such as C. B) the AE curve shifts downward to a curve such as AE₁. C) the AE curve shifts upward to a curve such as AE₂. D) there is a movement along AE₁to a point such as B.

Question

Quizplus · Accepted Answer

An increase in investment due to expected higher profits shifts the aggregate expenditure curve upward, indicating higher total spending at each level of income.

-In the Above Figure the Economy Is Initially at Point