If there is a decrease in autonomous expenditure, the new AE curve is
A)flatter than the original AE curve.
B)steeper than the original AE curve.
C)parallel and above the original AE curve.
D)parallel and below the original AE curve.
E)downward sloping.

Question

Quizplus · Accepted Answer

A decrease in autonomous expenditure would shift the original AE curve downwards. The new AE curve would be parallel to the original AE curve since only autonomous expenditure has changed. However, it would be below the original AE curve since the decrease in autonomous expenditure means lower overall expenditure levels at every level of national income. Therefore, the correct answer is D - parallel and below the original AE curve.

If There Is a Decrease in Autonomous Expenditure, the New