Which of the following best characterizes the relationship between the aggregate demand curve and the aggregate expenditure line?
A) If the aggregate expenditure line shifts while prices are constant, the resulting change in equilibrium output demanded is depicted as a movement along the aggregate demand curve.
B) If the aggregate expenditure line shifts while prices are constant, the resulting change in equilibrium output demanded is depicted as a shift of the aggregate demand curve.
C) If the aggregate expenditure line shifts, the aggregate demand curve also shifts.
D) If a movement occurs along the aggregate expenditure curve, movement also occurs along the aggregate demand curve.

Question

Which of the following best characterizes the relationship between the aggregate demand curve and the aggregate expenditure line?  
A) If the aggregate expenditure line shifts while prices are constant, the resulting change in equilibrium output demanded is depicted as a movement along the aggregate demand curve. 
B) If the aggregate expenditure line shifts while prices are constant, the resulting change in equilibrium output demanded is depicted as a shift of the aggregate demand curve. 
C) If the aggregate expenditure line shifts, the aggregate demand curve also shifts. 
D) If a movement occurs along the aggregate expenditure curve, movement also occurs along the aggregate demand curve.

Quizplus · Accepted Answer

The relationship between the aggregate demand curve and the aggregate expenditure line is such that a shift in the aggregate expenditure line while prices are constant leads to a corresponding shift in the aggregate demand curve. This is because the aggregate expenditure line represents the level of aggregate expenditure at each level of output, while the aggregate demand curve shows the relationship between the price level and the level of real GDP demanded. A shift in the aggregate expenditure line indicates a change in one of the components of aggregate expenditure (consumption, investment, government spending, or net exports) that affects output demanded at each price level. This change in output demanded is depicted as a shift in the aggregate demand curve, rather than a movement along it.

Which of the Following Best Characterizes the Relationship Between the Aggregate