Moving along the aggregate expenditure (AE) curve, when real GDP increases, aggregate planned expenditures increase
A) by more than real GDP.
B) by the same amount as does real GDP.
C) by less than real GDP.
D) proportionately with real GDP.
E) by the same percentage as does real GDP.

Question

Quizplus · Accepted Answer

As real GDP increases, aggregate planned expenditures increase by less than real GDP because some components of aggregate expenditure, like consumption, depend on income, which increases with GDP but not in a one-to-one ratio.

Moving Along the Aggregate Expenditure (AE) Curve, When Real GDP