Question on aggregate demand curve
Course:- Macroeconomics
Reference No.:- EM1369146

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Suppose that aggregate price level is constant, interest rate is fixed, and there are no taxes on foreign trade, how much will the aggregate demand curve shift and in what direction if the following events occur?

A. An autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3.

B. Firms reduce investment spending by $40 billion; the marginal propensity to consume is .08.

C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is .06.


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