On the aggregate expenditure graph, if autonomous saving decreases by $15 billion.What will be the effect on the aggregate expenditure line?
A) The aggregate expenditure line will shift upward by $15 billion
B) The aggregate expenditure line will stay in the same position.
C) The aggregate expenditure line will shift downward by $15 billion.
D) The aggregate expenditure line will first shift downward, and then it will shift upward by $15 billion.

Question

On the aggregate expenditure graph, if autonomous saving decreases by $15 billion.What will be the effect on the aggregate expenditure line?  
A) The aggregate expenditure line will shift upward by $15 billion 
B) The aggregate expenditure line will stay in the same position. 
C) The aggregate expenditure line will shift downward by $15 billion. 
D) The aggregate expenditure line will first shift downward, and then it will shift upward by $15 billion.

Quizplus · Accepted Answer

A decrease in autonomous saving implies an increase in autonomous consumption. This increase in consumption shifts the aggregate expenditure line upward by the amount of the decrease in saving, assuming the marginal propensity to consume is less than 1.

On the Aggregate Expenditure Graph, If Autonomous Saving Decreases by $15