Which of the following would result from a decrease in autonomous saving?
A)an upward shift of the aggregate expenditure line
B)an upward shift of the 45-degree line
C)a decrease in the equilibrium level of real GDP demanded
D)an increase in the level of autonomous consumption
E)an increase in the level of autonomous investment

Question

Quizplus · Accepted Answer

Autonomous saving is a component of the aggregate saving function, which determines the level of saving at each level of real GDP, holding other factors constant. A decrease in autonomous saving implies that at each level of real GDP, households and businesses are saving less than before. This reduces the level of aggregate expenditure at each level of real GDP, leading to a downward shift of the aggregate expenditure line. Therefore, the correct answer is A, an upward shift of the aggregate expenditure line, as it is the opposite of what would happen.

Which of the Following Would Result from a Decrease in Autonomous