Suppose the level of autonomous spending decreases at a given price level.How does this relate to the aggregate expenditure line and the aggregate demand curve?
A) The aggregate expenditure line shifts upward, and the economy moves along the aggregate demand curve.
B) The aggregate expenditure line shifts downward, and the economy moves along the aggregate demand curve.
C) The aggregate expenditure line shifts upward, and the aggregate demand curve shifts to the right.
D) The aggregate expenditure line shifts downward, and the aggregate demand curve shifts to the left.

Question

Suppose the level of autonomous spending decreases at a given price level.How does this relate to the aggregate expenditure line and the aggregate demand curve?  
A) The aggregate expenditure line shifts upward, and the economy moves along the aggregate demand curve. 
B) The aggregate expenditure line shifts downward, and the economy moves along the aggregate demand curve. 
C) The aggregate expenditure line shifts upward, and the aggregate demand curve shifts to the right. 
D) The aggregate expenditure line shifts downward, and the aggregate demand curve shifts to the left.

Quizplus · Accepted Answer

A decrease in autonomous spending leads to a decrease in aggregate expenditure at every price level, which shifts the aggregate expenditure line downward. This, in turn, leads to a decrease in real GDP and a decrease in price level, which shifts the aggregate demand curve to the left. Therefore, the correct choice is D, i.e., "The aggregate expenditure line shifts downward, and the aggregate demand curve shifts to the left."

Suppose the Level of Autonomous Spending Decreases at a Given