An increase in the price level
A)shifts the AE curve upward and increases equilibrium expenditure.
B)shifts the AE curve upward and decreases equilibrium expenditure.
C)shifts the AE curve downward and increases equilibrium expenditure.
D)shifts the AE curve downward and decreases equilibrium expenditure.
E)has no impact on the AE curve.

Question

Quizplus · Accepted Answer

An increase in the price level will decrease planned expenditure at every level of real income, meaning there will be a leftward shift in the AE curve. As a result, equilibrium expenditure will decrease.

An Increase in the Price Level