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3 years ago

How do changes in planned expenditures affect the aggregate demand curve?

Business

1 answer:

vagabundo [1.1K]3 years ago

6 0

Answer:

When there is change in income level which determines the level of planned expenditures, there is a movement along the Aggregate expenditure curve but a shift towards the left or right on the Aggregate Demand curve.

Explanation:

Planned expenditures depicts the relationship between total spending, which is determined by income level in the economy; and the level of real GDP produced, with price level kept constant. Hence, an increase in income causes a movement along the Aggregate Expenditure curve.

Aggregate Demand depicts the relationship between price level and the level of real GDP produced, with income level kept constant. Hence, an increase in price level triggers a movement along the Aggregate Demand curve.

Therefore when income level changes which by extension means a change in planned expenditures, there is a movement along the aggregate expenditure curve but an left (inward) or right (outward) move on the Aggregate Demand curve; as long as price levels remain constant

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How do changes in planned expenditures affect the aggregate demand​ curve?

How do changes in planned expenditures affect the aggregate demand curve?