If autonomous expenditure increases with no change in the price ...

[Wadzanai]

If autonomous expenditure increases with no change in the price level, what happens to the AE curve and the AD curve? Which curve shifts by an amount that is determined by the multiplier and why?
 
  What will be an ideal response?

Question 2

Refer to Figure 2-13. What is the opportunity cost of producing 1 ton of pineapples in Costa Rica?
 
  A) 3/8 of a ton of coconuts B) 2/3 of a ton of coconuts
  C) 1 1/2 tons of coconuts D) 100 tons of coconuts

[Chelseyj.hasty]

Answer to Question 1

A change in autonomous expenditure with no change in the price level shifts both the AE curve and the AD curve. The AE curve shifts by an amount equal to the change in autonomous expenditure. The multiplier determines the magnitude of the shift in the AD curve. The AD curve shifts by an amount equal to the change in autonomous expenditure multiplied by the multiplier.

Answer to Question 2

C

[Wadzanai]

Correct answers!

[Chelseyj.hasty]

Great! Please up vote