An increase in planned real investment spending causes
A) a movement along the C + I + G + X curve and a shift of the aggregate demand curve.
B) a shift of the C + I + G + X curve and a movement along the aggregate demand curve.
C) a shift of the C + I + G + X curve but has no effect on the aggregate demand curve.
D) a shift of the C + I + G + X curve that causes the aggregate demand curve to shift.

Question

Quizplus · Accepted Answer

An increase in planned real investment spending will cause a shift of the C + I + G + X curve, as it increases the level of real GDP at each price level. This will in turn cause a shift of the aggregate demand curve, as there will be a higher level of aggregate expenditure at every price level. Therefore, the correct choice is D, where the increase in real investment spending causes a shift of the C + I + G + X curve, and this shift also causes a shift of the aggregate demand curve.

An Increase in Planned Real Investment Spending Causes