Use the following to answer questions Exhibit: Aggregate Expenditures (AE) in a Simplified Economy -(Exhibit: Aggregate Expenditures (AE) In a Simplified Economy) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy that is made up of only two sectors, households and firms, and that all investment is autonomous.Further, disposable personal income = real GDP.Suppose autonomous investment rises by $50 billion.In the short run, this will cause A)an increase in equilibrium AE of $100 billion, a shift to the right of the aggregate demand (A D)curve of $100 billion, and an increase in Y of more than $100 billion. B)an increase in autonomous AE of $50 billion, a shift to the right of the AD curve of $100 billion, and an increase in Y of less than $100 billion. C)an increase in autonomous AE of $50 billion, a shift to the right of the AD curve of $100 billion, and an increase in Y of more than $200 billion. D)an increase in equilibrium AE of $50 billion, a shift to the right of the AD curve of $300 billion, and an increase in Y of less than $300 billion.

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An increase in autonomous investment by $50 billion increases autonomous AE by the same amount. The AD curve shifts right by the multiplier effect, which is typically more than the initial increase, but the increase in Y is less than the total shift in AD due to leakages in the economy.

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