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If investment increases by $15 billion and the economy’s MPC is 0.8 the aggregate demand curve will shift A.Leftward by $75 billion at school price level B .Leftward by $30 billion at each price level C. Rightward by $15 billion at each price level D. Rightward by $75 billion at each price level

Sagot :

B. Aggregate demand curve to shift leftward by $30 billion at each price level.

Aggregate demand curve

The entire amount of goods and services produced in the economy over time is represented by the aggregate demand curve. The relationship between the overall and the general level of pricing in the economy is depicted by the aggregate demand curve.

The aggregate demand curve will shift leftward when investment increases, as this will lead to a decrease in consumer spending. The amount of the shift is determined by the MPC, which in this case is 0.8. This means that for every $1 increase in investment, there will be an $0.80 decrease in consumer spending. Therefore, a $15 billion increase in investment will lead to a decrease in consumer spending of $12 billion ($15 billion x 0.8). This will cause the aggregate demand curve to shift leftward by $30 billion at each price level.

Given,

MPC = 0.8

The shift in the Aggregate Demand curve is equal to the increase in investment multiplied by the MPC.

Thus, the shift in the Aggregate Demand curve

= $15 billion × 0.8 = $12 billion

At each price level, the shift in the Aggregate Demand curve is equal to the shift in the Aggregate Demand curve multiplied by the price level.

Thus, the shift in the Aggregate Demand curve at each price level

= $12 billion × Price Level

Therefore, the shift in the Aggregate Demand curve at each price level

= $30 billion.

To learn more about the aggregate demand curve visit here:

https://brainly.com/question/13976328

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