On the aggregate expenditure graph, suppose autonomous investment increases by $20 billion.What will be the effect on the aggregate expenditure line?
A) The aggregate expenditure line will shift upward by $20 billion.
B) The aggregate expenditure line will stay the same.
C) The aggregate expenditure line will shift downward by $20 billion.
D) The aggregate expenditure line will first shift upward, and then it will shift downward by $20 billion.

Question

On the aggregate expenditure graph, suppose autonomous investment increases by $20 billion.What will be the effect on the aggregate expenditure line?  
A) The aggregate expenditure line will shift upward by $20 billion. 
B) The aggregate expenditure line will stay the same. 
C) The aggregate expenditure line will shift downward by $20 billion. 
D) The aggregate expenditure line will first shift upward, and then it will shift downward by $20 billion.

Quizplus · Accepted Answer

Autonomous investment is a component of aggregate expenditure, so an increase in autonomous investment will directly increase the aggregate expenditure at every income level. Therefore, the aggregate expenditure line will shift upward by $20 billion.

On the Aggregate Expenditure Graph, Suppose Autonomous Investment Increases by $20