1022B - Chapter 11

Which components of aggregate expenditure are influenced by real GDP?

• Consumption expenditure, investment, and imports

• Investment, exports, and imports

• Consumption expenditure and imports

• Consumption expenditure, government expenditure, investment, and imports

The figure illustrates the components of aggregate planned expenditure on Fish Island. The Island has no imports or exports, no income taxes, and the price level is fixed.

The marginal propensity to consume is:

Fluctuations in autonomous expenditure bring equal fluctuations in real GDP.

• TRUE

• FALSE

A fall in the price level...

• shifts the AD curve rightward and brings a movement up along the AE curve

• shifts the AD curve leftward and brings a movement down along the AE curve

• shifts the AE curve upward and brings a movement down along the AD curve

• shifts the AE curve downward and brings a movement up along the AD curve

The graph shows an economy that has no taxes or imports. AD₀ is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD₁ is the aggregate demand curve when investment is​ $1.5 trillion.

What is the size of the multiplier in the short​ run?