FIGURE 23-1 Refer to Figure 23-1

Multiple Choice

FIGURE 23-1 Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P₀.Now,suppose there is an increase in desired investment and no change in the price level.Which of the following statements describes the likely macroeconomic effects?

A) The AE curve shifts up to AE²,the AD curve shifts to AD²,and a new equilibrium is established at point C,with real GDP at Y₂.
B) The AE curve shifts down to AE¹,the AD curve shifts to AD¹,and a new equilibrium is established at point F,with real GDP at Y₁.
C) The AE curve shifts to AE¹,the AD curve shifts to AD¹,and a new equilibrium is established at point E,with real GDP at Y₂.
D) The AE curve shifts to AE²,the AD curve shifts to AD¹,and a new equilibrium is established at point F,with real GDP at Y₂.
E) The AE curve shifts to AE²,the AD curve shifts to AD²,and a new equilibrium is established at point E,with real GDP at Y₂.