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Multiple Choice QuestionChanges in consumption and gross investment can:Multiple choice question.cause a movement along the aggregate demand curve.shift the aggregate supply.shift the aggregate demand curve.cause a movement along the aggregate supply curve.

Question

Multiple Choice QuestionChanges in consumption and gross investment can:Multiple choice question.cause a movement along the aggregate demand curve.shift the aggregate supply.shift the aggregate demand curve.cause a movement along the aggregate supply curve.

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Solution

The correct answer is:

shift the aggregate demand curve.

Explanation:

  1. Aggregate demand is the total demand for all goods and services in an economy. It is determined by the sum of consumption, investment, government spending, and net exports.

  2. Changes in consumption and gross investment can shift the aggregate demand curve. If consumption increases, people are buying more goods and services, which increases demand and shifts the aggregate demand curve to the right. Similarly, if gross investment increases, businesses are investing more in capital, which also increases demand and shifts the aggregate demand curve to the right.

  3. On the other hand, changes in consumption and gross investment do not cause a movement along the aggregate demand curve or shift the aggregate supply. A movement along the curve would be caused by a change in the price level, not a change in consumption or investment. And the aggregate supply curve would shift due to changes in the availability of resources or technology, not changes in demand.

  4. Therefore, changes in consumption and gross investment can shift the aggregate demand curve.

This problem has been solved

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