An increase in autonomous consumption has the same equilibrium effect as a(n)

Question

Quizplus · Accepted Answer

An increase in autonomous consumption means that households are spending more regardless of their income levels, which shifts the aggregate expenditure line upward. This leads to a new equilibrium point with higher real GDP and price level. An increase in investment has the same effect on the aggregate expenditure line, shifting it upward and increasing real GDP and the price level at the new equilibrium point. Therefore, an increase in autonomous consumption has the same equilibrium effect as an increase in investment.

An Increase in Autonomous Consumption Has the Same Equilibrium Effect