How will an increase in the price level affect the aggregate expenditure line?
A) It will shift the aggregate expenditure line upward.
B) It will shift the aggregate expenditure line downward.
C) It will result in a movement upward along the aggregate expenditure line.
D) It will result in a movement downward along the aggregate expenditure line.

Question

How will an increase in the price level affect the aggregate expenditure line?  
A) It will shift the aggregate expenditure line upward. 
B) It will shift the aggregate expenditure line downward. 
C) It will result in a movement upward along the aggregate expenditure line. 
D) It will result in a movement downward along the aggregate expenditure line.

Quizplus · Accepted Answer

An increase in the price level decreases the real value of money, which reduces consumer purchasing power and leads to lower consumption and investment. This decrease in consumption and investment causes the aggregate expenditure line to shift downward, as it represents a decrease in overall spending at each level of income.

How Will an Increase in the Price Level Affect the Aggregate