How do changes in planned expenditures affect the aggregate demand curve?

A. The aggregate demand curve shifts to the left autonomous consumption, autonomous investment, autonomous net exports, or government purchases increase, or if taxes decrease

B. The aggregate demand curve shifts to the right if autonomous consumption, autonomous Investment, autonomous net exports, government purchases, or taxes increase

C. The aggregate demand curve shifts to the right autonomous crumption, autonomous investment, autonomous not exports, government purchase, or taxe decrease

D. The aggregate demand curve shifts to the right if autonomous consumption, autonomous Investment, autonomous net exports, or goverment purchases increase or if taxes decrease

Expert Solution

Ans. Correct Option is D.

Explantion-

Planned Expenditure - where the government plans the budget according to the expenditure.

Autonomous consumption = CS ( consumer spending ) - MPC ( marginal propensity to consume )

Autonomous Investment , are the investments made by the government or any other institution , by being independent of the considerations of the economy.

Autonomous Net Exports - are induced net exports , which are income dependent.

It can increase in either way , if theres an autonomus consumption , investment and net exports.

OR

government purchase increase

OR

if taxes decreases

, if all these happens all together , then the aggregate demand curve will not shift to the right. Thats why the correct option is D.

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Rahul Sunny answered 2 years ago

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