If consumption or gross investment increase for any reason other than the price level, that’s:Multiple choice question.neither a shift of the aggregate demand nor a movement along the aggregate demand.both a shift of the aggregate demand and a movement along the aggregate demand.a shift of the aggregate demand.a movement along the aggregate demand.
Question
If consumption or gross investment increase for any reason other than the price level, that’s:Multiple choice question.neither a shift of the aggregate demand nor a movement along the aggregate demand.both a shift of the aggregate demand and a movement along the aggregate demand.a shift of the aggregate demand.a movement along the aggregate demand.
Solution
The correct answer is: a shift of the aggregate demand.
Here's why:
Aggregate demand is the total demand for all goods and services in an economy. It's determined by the sum of consumption, investment, government spending, and net exports.
If consumption or gross investment increase for any reason other than the price level, it means there's a change in one of the components of aggregate demand. This change will cause the aggregate demand curve to shift to the right, indicating an increase in aggregate demand at all price levels.
A movement along the aggregate demand curve, on the other hand, only occurs when there's a change in the price level. Since the question specifies that the increase in consumption or investment is not due to a change in the price level, we can rule out a movement along the aggregate demand curve.
Therefore, an increase in consumption or investment for reasons other than the price level would cause a shift of the aggregate demand curve.
Similar Questions
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If consumption gross investment or net exports are increasing because of the lower price level, there will be a:Multiple choice question.shift of the AD curve.movement along the AS curve.shift of the AS curve.movement along the AD curve.
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