Increases in autonomous spending have an expansionary effect and make ________ levels of real income consistent with a given interest rate.

Question

Quizplus · Accepted Answer

Autonomous spending refers to spending that occurs regardless of changes in disposable income, such as investment spending or government spending. When there is an increase in autonomous spending, it results in a higher level of aggregate demand, leading to an increase in output and employment. This increase in output and employment leads to an increase in real income, which is consistent with a given interest rate. Therefore, the correct answer is B, higher levels of real income are consistent with a given interest rate when there is an increase in autonomous spending.

Increases in Autonomous Spending Have an Expansionary Effect and Make