Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.
A) downward; leftward; decreases
B) downward; rightward; decreases
C) upward; rightward; increases
D) upward; leftward; increases

Question

Quizplus · Accepted Answer

Both the Keynesian and aggregate demand-supply frameworks predict that an increase in household wealth will lead to an increase in consumption spending, which will increase aggregate demand (AD). As a result, the AD curve will shift to the right, leading to an increase in Real GDP. In the Keynesian framework, this shift will also lead to an upward shift in the total expenditure (TE) curve, while in the aggregate demand-supply framework, the TE curve remains unchanged as the shift in AD is reflected in a movement along the aggregate supply curve. The only option that includes an upward shift in the AD curve and an increase in Real GDP is C.

Considering Both the Keynesian and the Aggregate Demand-Supply Frameworks,if Households