A decrease in aggregate expenditure shifts the aggregate demand curve to the:
A)right by the level of decrease in aggregate expenditure
B)left by the level of decrease in aggregate expenditure times the multiplier
C)left by the level of decrease in aggregate expenditure
D)right by the level of decrease in aggregate expenditure times the multiplier

Question

Quizplus · Accepted Answer

A decrease in aggregate expenditure will cause a decrease in GDP (assuming a constant price level), which will cause a multiplied decrease in aggregate demand due to the multiplier effect. Therefore, the aggregate demand curve will shift left by the level of decrease in aggregate expenditure times the multiplier.

A Decrease in Aggregate Expenditure Shifts the Aggregate Demand Curve