Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to
Aggregate demand?

A) It shifts left by $150 billion.
B) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion.
C) It shifts right by $150 billion
D) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.