If investment decreases, the AE curve shifts
A) upward and the AD curve shifts rightward.
B) downward and the AD curve shifts leftward.
C) upward and there is a movement along the AD curve.
D) downward and there is a movement along the AD curve.

Question

Quizplus · Accepted Answer

A decrease in investment leads to a decrease in aggregate expenditure (AE), which shifts the AE curve downward. This decrease in investment also leads to a decrease in aggregate demand (AD), shifting the AD curve leftward.

If Investment Decreases, the AE Curve Shifts