If investment decreases:
A)the aggregate expenditure line shifts down.
B)real GDP is not affected.
C)government expenditure also decreases.
D)the aggregate expenditure line shifts up.

Question

Quizplus · Accepted Answer

Investment is a component of aggregate expenditure, so a decrease in investment would lower the aggregate expenditure line. Real GDP would be affected by the decrease in investment, as it is a component of GDP calculation. Government expenditure may or may not be affected by the decrease in investment, as it depends on government policy. Therefore, A is the best choice.

If Investment Decreases