In a macro model with a constant price level, an increase in autonomous desired consumption will cause the AE curve to shift O downward and the AD curve to shift to the left

Economics Feb 03, 2021

In a macro model with a constant price level, an increase in autonomous desired consumption will cause the AE curve to shift
O downward and the AD curve to shift to the left. O upward and the AD curve to shift to the right. 0 upward and a movement to the right along the AD curve. O downward and the AD curve to shift to the right.

Expert Solution

The correct option is 2nd "upward and the AD curve to shift to the right".

The consumption which is not affected by level of income is known as autonomous desired consumption. Increase in aggregate demand causes the aggregate demand to shift upward and right.

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