When the price level falls, the aggregate planned expenditure curve shifts ________, equilibrium expenditure ________ and there is a movement ________ along the aggregate demand curve.
A) upward; increases; upward
B) downward; decreases; downward
C) upward; increases; downward
D) downward; increases; upward
E) upward; decreases; downward

Question

Quizplus · Accepted Answer

When the price level falls, the aggregate planned expenditure curve shifts upward because lower prices increase real wealth, leading to higher consumption and investment. This increases equilibrium expenditure. There is a movement downward along the aggregate demand curve as the quantity of goods and services demanded increases at lower price levels.

When the Price Level Falls, the Aggregate Planned Expenditure Curve