Exhibit 10-7
-Assume the United States' aggregate expenditure line started at AE(1) in Exhibit 10-7. When the real estate market crashed, its aggregate expenditure would have changed to
A)AE(1)
B)AE(2)
C)AE(3)
D)AE(4)
E)We cannot answer without knowing what happened to consumption

Question

Exhibit 10-7 
-Assume the United States' aggregate expenditure line started at AE(1) in Exhibit 10-7. When the real estate market crashed, its aggregate expenditure would have changed to
A)AE(1) 
B)AE(2) 
C)AE(3) 
D)AE(4) 
E)We cannot answer without knowing what happened to consumption

Quizplus · Accepted Answer

When the real estate market crashes, it typically leads to a decrease in consumer wealth and confidence, reducing consumption and investment. This would shift the aggregate expenditure line downward, likely to AE(3).

Exhibit 10-7 -Assume the United States' Aggregate Expenditure Line Started at AE(1)