In the Keynesian AE model,what impact does an increase in real wealth have on AE?
A)It shifts AE down, increases inventories, and reduces output.
B)It shifts AE up, increases inventories, and causes an increase in output.
C)It shifts AE up, reduces inventories, and causes an increase in output.
D)It shifts AE down, reduces inventories, and reduces output.

Question

Quizplus · Accepted Answer

An increase in real wealth increases consumption, which shifts the Aggregate Expenditure (AE) curve upward, reduces inventories, and leads to an increase in output.

In the Keynesian AE Model,what Impact Does an Increase in Real