Other things being equal,as the price level rises exogenously,the aggregate expenditure (AE)function shifts
A)down and the economy will move upward to the left along the AD curve.
B)down and the economy will move downward to the right along the AD curve.
C)upward and the economy moves upward to the left along the AD curve.
D)upward and the economy moves downward to the right along the AD curve.
E)to the right and the AD curve will also shift to the right.

Question

Quizplus · Accepted Answer

When the price level rises exogenously, the purchasing power of consumers decreases, leading to a decrease in consumption expenditure. This leads to a leftward shift in the aggregate expenditure function, which in turn leads to a movement upwards and to the left along the AD (aggregate demand) curve. Therefore, the correct choice is A.

Other Things Being Equal,as the Price Level Rises Exogenously,the Aggregate