Question

Which of the following statements represents a correct and sequentially accurate economic explanation?

Group of answer choices

A. If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts leftward.

B. If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts rightward.

C. If consumption rises, total expenditures on goods and services rises, and the AD curve shifts rightward.

D. If consumption rises, total expenditures on goods and services rises, and the quantity demanded of Real GDP rises.

E. b and c

Answer 1

Aggregate demand is the total demand of all goods and services in the economy during a given period of time. It can also be called as total expenditure in the economy.

AD= C+I+G 3 sector economy

Here C= consumption, G= government purchases and I= investment

If C decreases or G decreases it means total expenditure decreases which cause AD curve to shift leftward.

If C increases or G increases it means total expenditure increases which cause AD curve to shift rightward.

The above discussion implies that option B and C both are correct so correct option is E