-Refer to Figure 11.1. If autonomous expenditure A₀ in panel a) of the figure increased: A) real GDP would increase and the economy would move down along the AD function. B) real GDP would increase and the AD function would shift to the left. C) real GDP would decrease and the economy would move up along the AD function. D) real GDP would increase and the AD function would shift to the right.

Question

Quizplus · Accepted Answer

An increase in autonomous expenditure leads to an increase in aggregate demand, which is represented by a rightward shift of the AD curve, resulting in an increase in real GDP.