A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure.
A) upward; increases
B) upward; decreases
C) downward; increases
D) downward; decreases

Question

Quizplus · Accepted Answer

A fall in the price level increases consumers' real wealth, leading to higher consumption at each level of income. This shifts the aggregate expenditure (AE) curve upward and results in an increase in equilibrium expenditure.

A Fall in the Price Level Shifts the AE Curve