If consumption decreases:
A)a depression occurs in the economy.
B)real GDP rises.
C)the aggregate expenditure line shifts down.
D)the aggregate expenditure line shifts up.

Question

Quizplus · Accepted Answer

When consumption decreases, the aggregate expenditure line shifts down. This is because consumption is a component of aggregate expenditure (AE), which is the total spending in the economy. As AE decreases, so does the demand for goods and services, leading to a decrease in real GDP. However, a depression occurs when there is a prolonged period of economic decline that results in high levels of unemployment and low levels of economic activity, which is not necessarily the case when consumption decreases.

If Consumption Decreases