In general economic environments that correspond to lower levels of planned aggregate expenditure for a given level of Y have PAE curves that are:
A) higher on the expenditure diagram.
B) lower on the expenditure diagram.
C) at multiple points on the diagram.
D) equivalent at point in the diagram.

Question

Quizplus · Accepted Answer

Lower levels of planned aggregate expenditure for a given level of Y indicate a lower demand for goods and services, resulting in a lower level of overall economic activity. As a result, the PAE curve shifts downward on the expenditure diagram, indicating a lower level of planned expenditure at each level of GDP. Therefore, the correct answer is B.

In General Economic Environments That Correspond to Lower Levels of Planned