Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?
A)a decrease in the business confidence of firms
B)a reduction in government purchases
C)a decrease in the MPC
D)a decrease in the price level
E)an increase in the price level

Question

Quizplus · Accepted Answer

An increase in the price level would cause a movement upward along the AD curve, as it represents a higher price level leading to lower quantity demanded. This would also cause a downward shift in the AE curve, as higher prices reduce consumption and investment, leading to lower aggregate expenditure.

Which of the Following Would Likely Cause a Downward Shift